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Compared with the Hong Kong terminal business, the lower THC in Shenzhen does not necessarily imply a lower return to the Shenzhen terminal business because operating costs, e.g. labour wages and land price, in mainland China are much lower than those in Hong Kong.
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Alternatively, it can be assumed that the Shenzhen port is now running at optimal capacity and the Hong Kong terminal operators set prices to maximize profits from the residual demand. The use of this alternative assumption will not affect the analytical results of the model.
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