Endogenous Transportation Costs in Firm's Organization Choice

We analyze the endogenous firms' choice of organization form in the presence of endogenous freight rates, port fees with the public (or asymmetric) port ownership. We found that regardless of port ownership, one firm provides corporate incentives (i.e., U-form), and other firm provides divisional incentives (i.e., M-form). Thus, choosing U-form (resp. M-form) in the asymmetric organization for firm and producer surplus is profitable (resp. unprofitable), but for the government and consumer surplus is socially undesirable (resp. desirable). Furthermore, we present some extensions to check the robustness of the obtained results.