The optimal toll scheme for ships queuing at the entrance of Panama Canal
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The optimal toll scheme for ships queuing at the entrance of Panama Canal Chen-Hsiu Laih and Pey-Yuan Sun Department of Merchant Marine, National Taiwan Ocean University, 2, Pei-Ning Road, Keelung, Taiwan. E-mails: [email protected]; wasimogu:ntou.edu.tw
Abstract
As the insufficiency of watercourses and the limitation of breadth are leading to long queues at Panama Canal, the plan of canal expansion is undertaken by the authorities to increase the service capacity. In order to avoid ships queuing at the entrance of the canal, this research establishes an optimal toll scheme, which will effectively disperse ship arrival times and eliminate long queues. The research shows all ship arrival rates at the entrance of canal before and after implementing the optimal toll scheme.
Maritime Economics & Logistics (2014) 16, 20–32. doi:10.1057/mel.2013.18; published online 28 November 2013
Keywords: queuing; Panama Canal; optimal toll schemes
Introduction and Literature Review Most of the ships passing through the Panama Canal carry cargoes to the east coast of America. Because of limitations in the width of the canal locks, large vessels, such as Post-Panamax, cannot enter the canal. Furthermore, long waiting and crossing times often oblige shipowners to seek out alternative routes, for example, the American mini-bridge via sea-land intermodal transportation. The overcrowding of the Canal advantages intermodal transportation, which accounted for 61 per cent of all cargoes shipped to the east coast of America in 2009. The government of Panama has decided to syndicate US$5.25 billion to enlarge the canal by building a third watercourse. This investment is expected to be completed in 2017. After this, it is expected that more ships, including Post-Panamax, will be willing to cross the Panama Canal, and the new situation must have a sizable impact on the American mini-bridge of intermodal transportation. © 2014 Macmillan Publishers Ltd. 1479-2931 Maritime Economics & Logistics www.palgrave-journals.com/mel/
Vol. 16, 1, 20–32
Optimal toll scheme for ships queuing at the entrance of Panama Canal
After the expansion, queuing at the entrance of the canal will be more predictable. This research intends to establish the canal’s queuing toll scheme, so as to eliminate queuing situations. One way of achieving this would be a toll system that replaces total queuing time costs by the total toll amount. In this research, ship arrival times at the entrance of the canal have been divided into three different types (early, on-time and late arrivals). These arrival types show linear relationships between arrival time and queuing time. The equilibrium cost and the optimal toll scheme can be deduced from these relationships. Under the optimal toll scheme, the arrival time of ships will change and this would help to disperse arrivals, thus mitigating queuing. The research firstly reviews the related theories of queuing pricing in order to develop a cost function – toll scheme model. (a) Laih (1994) developed the optimal and sub-optimal step
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