Container slot robust booking and pricing strategy of the option-spot dual channel considering partial demand uncertainty

Abstract

The expected profit maximization of freight forwarders lies in making reasonable container slot booking and pricing decisions. In the face of extraordinary circumstances such as the COVID-19 pandemic, the shipping company is likely to experience short-term phenomena such as limited transportation capacity and rapidly rising freight rates. The application of financial derivatives to avoid risks brought by uncertain markets has become mainstream. In this paper, from the perspective of maximizing freight forwarder profit under uncertain risk, this paper considers the dual channel market of container slot options and spot markets and studies how freight forwarders can formulate reasonable container slot booking and pricing strategies when only partial demand information is known. First, we establish the worst-case robust joint booking and pricing model for container slot. The optimal solution for joint decision-making that can maximize freight forwarding benefits under appropriate conditions is provided. Based on this, the influences of parameters such as spot market prices, penalty costs, option contract parameters, and price-sensitive factors on freight forwarding pricing decisions and maximum expected profit are discussed. The results show that the uncertainty of partial demand and spot market supply insufficiency will lead to the retail price of the optimal container slot being lower than the optimal retail price without risk. In addition, the joint booking and pricing decision can ensure that the freight forwarder obtains greater benefits. The mutual adjustment of two decisions can flexibly respond to market changes and is more robust.