High market concentration in the Philippine domestic shipping industry has always been a subject of concern among policymakers and researchers. While many reforms aimed at improving the level of competition in the industry have been implemented since the 1990s, studies show that domestic shipping operations remain in the hands of a few players, especially at the route level. This study aims to enrich the discussion by providing an alternative measure of market power in domestic shipping through the estimation of markups –a useful indicator of how firms can price their goods or services above marginal cost. Estimates confirm the exercise of market power in the domestic shipping industry, as evidenced by high markups. It was also found that the markup on freight is relatively larger than the markups on passenger services. Additional analysis confirms that having a high market share influences high markups significantly.
Comments to this paper are welcome within 60 days from the date of posting. Email publications@pids.gov.ph.
