Implications of government subsidies on shipping companies’ shore power usage strategies in port

Abstract

The shore power available in ports has a low utilization rate, though its use is an effective way to reduce pollution emissions. Encouraging shipping companies to use shore power has become an important issue in green port construction. This paper builds a Nash game between two shipping companies regarding the decision to use shore power and analyzes the impact of government intervention on the equilibrium that can be reached between them. The result shows that in the absence of government intervention, an equilibrium between the two shipping companies in the use of shore power would require a sufficient benefit. Unfortunately, the two shipping companies could be caught in a prisoner’s dilemma when they reach such an equilibrium. However, government intervention through price subsidies can improve this situation, either by expanding the area in which an equilibrium is reached or by mitigating the toll of the prisoner’s dilemma. Moreover, price subsidies are also conducive to improving supply chain profits and social welfare. The paper also analyzes the mutual influence between different government intervention methods and the impact of other important factors on the performance of government subsidies.