Strategic maritime container service design in oligopolistic markets

This paper considers the maritime container assignment problem in a market setting with two competing firms. Given a series of known, exogenous demands for service between pairs of ports, each company is free to design liner services connecting a subset of the ports and demand, subject to the size of their fleets and the potential for profit. The model is designed as a three-stage complete information game: in the first stage, the firms simultaneously invest in their fleet; in the second stage, they individually design their services and solve the route assignment problem with respect to the transport demand they expect to serve, given the fleet determined in the first stage; in the final stage, the firms compete in terms of freight rates on each origin–destination movement. The game is solved by backward induction. Numerical solutions are provided to characterize the equilibria of the game.