Game-theoretical models for competition analysis in a new emerging liner container shipping market |
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| Institution: | 1. Centre of Maritime Studies, National University of Singapore, Singapore 118411, Singapore;2. Department of Civil and Environmental Engineering, National University of Singapore, Singapore 117576, Singapore;3. School of Economics and Management, Tongji University, Shanghai 200092, China;1. Transportation Management College, Dalian Maritime University, Dalian 116026, China;2. School of Traffic and Transportation, Beijing Jiaotong University, Beijing 100044, China;1. Department of Logistics Engineering and Management, Lingnan (University) College, Sun Yat-Sen University, PR China;2. Department of Industrial Engineering and Logistics Management, Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong SAR, PR China;1. Faculty of Applied Economics, University of Antwerp, Belgium;2. China institute of FTZ Supply Chain, Shanghai Maritime University, Shanghai, China;3. Maritime Institute, Faculty of Law, Ghent University, Ghent, Belgium;4. Antwerp Maritime Academy, Belgium;1. School of Transportation Management, Dalian Maritime University, 1 Linghai Road, Dalian 116026, PR China;2. Department of Maritime Administration, Texas A&M University, Galveston, USA;1. Department of Economic Analysis and IEI, University of Valencia, Campus del Tarongers, 46022 Valencia, Spain;2. Department of Economic Analysis and ERI-CES, University of Valencia, Campus del Tarongers, 46022 Valencia, Spain;3. CORE-UCL, Louvain-la-Neuve, Belgium |
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| Abstract: | This paper develops three game-theoretical models to analyze shipping competition between two carriers in a new emerging liner container shipping market. The behavior of each carrier is characterized by an optimization model with the objective to maximize his payoff by setting optimal freight rate and shipping deployment (a combination of service frequency and ship capacity setting). The market share for each carrier is determined by the Logit-based discrete choice model. Three competitive game strategic interactions are further investigated, namely, Nash game, Stackelberg game and deterrence by taking account of the economies of scale of the ship capacity settings. Three corresponding competition models with discrete pure strategy are formulated as the variables in shipment deployment are indivisible and the pricing adjustment is step-wise in practice. A ɛ -approximate equilibrium and related numerical solution algorithm are proposed to analyze the effect of Nash equilibrium. Finally, the developed models are numerically evaluated by a case study. The case study shows that, with increasing container demand in the market, expanding ship capacity setting is preferable due to its low marginal cost. Furthermore, Stackelberg equilibrium is a prevailing strategy in most market situations since it makes players attain more benefits from the accommodating market. Moreover, the deterrence effects largely depend on the deterrence objective. An aggressive deterrence strategy may make potential monopolist suffer large benefit loss and an easing strategy has little deterrence effect. |
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| Keywords: | Liner container shipping market Nash competition Stackelberg game Deterrence Approximate equilibrium |
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