Demand uncertainty and overcapacity in port infrastructure: the role of passengers

Abstract

This paper tries to assess the possible existence of excess of capacity for the Spanish port infrastructures. In order to do this, we estimate a cost function system considering the existence of demand uncertainty of cargo and passengers for port authorities. We find that, in order to fulfil the regularity conditions of the cost function system, we have to specify both demands as uncertain. The results show the importance of passenger variability in terms of demand of variable inputs and the use of quasi-fixed input. We also demonstrate the excess of capacity from the calculation of the shadow price of the quasi-fixed input after controlling demand uncertainty. Finally, some factors as the size of the port authorities’ hinterland, the relative specialization in containerised general cargo or passengers, the size of ports, the profitability rate or port regulation are considered as determinants of this excess of capacity.