Cooperation Vs. Non-Cooperation between Ports and Shipping Lines: a Game Theory Approach

Abstract

In response to fierce competition of container cargo transportation markets, cooperation has become the mainstream of this era. Consolidation of shipping routes, globalization of shipping lines and cooperation of port operators have emerged. This paper adopts a game theory approach to modelling consolidation of shipping lines and ports, and establishes a two-stage game scenario with two ports and multiple shipping lines. In the first stage, shipping lines and ports decide their cooperative strategies based on their prediction. The second stage is modelled as a static game with the coalition and the others that have not joined the coalition. Numerical analysis is conducted to obtain the main properties of some key parameters as well as the best choices of shipping lines and ports. The results show that the cooperation strategy of shipping lines strongly depends on the supply and demand situation of ships. The port which collaborates with shipping lines will have a significant decrease in port charges, which creates an advantage of gaining more port calls and demand, but it will have a limited effect on the charge of the other port. The cooperation may result in a loss to the port, thus reallocation of profit is needed to maintain the coalition.