Dynamic evolutionary game and simulation with embedded pricing model for channel selection in shipping supply chain

Abstract

In the context of the “Internet +” era, the shipping industry, which is struggling to survive due to economic weakness and excess capacity, is also actively seeking transformation to enhance core competitiveness of enterprises. This paper embeds the evolutionary game theory in the pricing model to explore the dynamic interaction mechanism between shipping companies and freight forwarders in channel selection. The conditions for shipping companies to choose different channel strategies in the long-term dynamic evolution process are derived. Then, we apply system dynamics to simulate the evolution model, and analyzes the influence of factors such as channel preference, operating cost and perceived loss on the dynamic evolution process. It is concluded that shipping companies and forwarders have different channel choices at different development stages, and when shipping companies choose to invade online platform, forwarders are motivated to choose online channel to obtain lower freight rates. When the channel preference of forwarders is moderate, the two channels coexist; when the channel preference of forwarders is high, the final stabilization strategy evolves to only the online channel. Furthermore, the channel preference of shippers has a greater impact on the evolutionary mechanism than that of forwarders.