A game theoretical approach to competition between multi-user terminals: the impact of dedicated terminals

In response to globalization and structural changes in logistics, firms in the transport industry have re-evaluated the scope of their activities [1]. A large number of shipping lines are vertically integrated to include terminal operations through shareholdings in or full ownership of dedicated ter...

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Bibliographic Details
Published in:Maritime policy and management 2011-07, Vol.38 (4), p.395-414
Main Authors: Kaselimi, Evangelia N., Notteboom, Theo E., De Borger, Bruno
Format: Article
Language:English
Subjects:
Agreements
Authority
Biological competition
Capacity
Companies
Competition
Compromises
Concessions
Differentiation
Economic analysis
Frameworks
Game theory
Globalization
Industry
Land
Lines
Logistics
Management
Maritime law
Networks
Ownership
Policies
Ports
Product differentiation
Property rights
Shipping
Shipping industry
Terminal facilities
Terminals
Transport buildings, stations and terminals
Transportation industry
Transportation terminals
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Summary:In response to globalization and structural changes in logistics, firms in the transport industry have re-evaluated the scope of their activities [1]. A large number of shipping lines are vertically integrated to include terminal operations through shareholdings in or full ownership of dedicated terminal facilities. A number of terminal operating companies expanded their activities from their respective homeports to an international terminal network structure. These two developments have led to a competitive setting in which trans-national terminal operating companies and shipping lines vie for the control over terminal capacity. In this paper, a horizontal product differentiation model is introduced to analyze competition between container terminals using a game theoretic approach. We focus on a landlord port management system with long-term concessions agreements shaping the formal relationships between the Port Authority (PA) (who owns the land) and the private Terminal Operators (TOs) (who use the land for terminal activities). Starting from the linear city model of Hotelling [2], we develop a framework for Cournot competition between multi-user terminals. By comparing the results (expected payoffs for potential TOs and PAs) of different cases, this paper demonstrates how the shift toward a fully dedicated terminal impacts on intra-port and inter-port competition between the remaining multi-user terminals. The model is illustrated by referring to a case of terminal competition in a realistic setting.
ISSN:0308-8839
1464-5254
DOI:10.1080/03088839.2011.588260