Digital transformation and port operations: Optimal investment under incomplete information

Abstract

Port digital transformation requires substantial investments. However, the benefits after transformation are difficult to accurately predict due to incomplete information available to ports. Balancing digital investments with benefits poses a key challenge for ports. We propose a game model based on revenue sharing between the port and the technology company to determine the digital level in equilibrium under incomplete information. Our study reveals that the incomplete information influences digital level of ports. When information is incomplete and ambiguous, the digital level of ports may be lower. However, significant ambiguous does not necessarily decrease the digital level due to risk pooling and agent cost effects. Additionally, revenue sharing reduces the incentive for technology company to withhold private information, and specific sharing ratios are identified. The study also finds that under incomplete information, digital level of port initially increases and then decreases with increasing optimism or the ratio of port's retained revenue. By considering these factors, our study provides guidance for ports in optimal investment strategies for digital transformation.