City Research Online

Abstract

We investigate the channels through which changes in operating capacity influence freight rates in the container shipping market using a novel dataset to create an operating capacity index at shipping-route level. Our analysis reveals that when supply elasticity is low, an increase in operating capacity tends to drive freight rates upward, as the market faces constraints and cannot easily accommodate additional demand. Conversely, when supply elasticity is high, an increase in operating capacity generally leads to lower freight rates, since additional capacity can be deployed to meet rising demand, preventing price surges. These findings suggest that shipping companies strategically adjust capacity based on market conditions to optimize profitability, shifting between price and quantity competition depending on route characteristics and supply elasticity.

Publication Type:	Article
Additional Information:	This is the peer reviewed version of the following article: Sui, C., Wang, S., Liang, J. & Nomikos, N. (2025). Operating Capacity, Pricing and Supply Elasticity in Container Shipping Markets. International Journal of Finance and Economics, doi: 10.1002/ijfe.70082 , which will be published in final form at https://10.1002/ijfe.70082. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.
Publisher Keywords:	International Trade; Container Shipping Markets; Freight Rates; Operating Capacity; Supply Elasticity; Marginal Cost; Capacity Planning.
Subjects:	H Social Sciences > HG Finance
Departments:	Bayes Business School Bayes Business School > Faculty of Finance
SWORD Depositor:	Symplectic Administrator

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