Modeling the Oligopolistic and Competitive Behavior of Carriers in Maritime Freight Transportation Networks

Abstract

The paper presents a novel multi-level hierarchical approach which models the oligopolistic and competitive behavior of carriers and their relationships in maritime freight transportation networks. With the merger of the carriers’ industry and some dominant carriers in a shipping market, the carrier competition frequently exhibits an oligopolistic nature. Three types of carriers are considered herein; ocean carriers, land carriers and port terminal operators. The oligopolistic ocean carriers, land carriers and port terminal operators compete with each other in their pricing and routing decisions, respectively. The carriers determine service charges and delivery routes at different parts of the multimodal freight network, having hierarchical interactions. In a game theoretic approach, ocean carriers are regarded as the leaders in an oligopoly shipping market. Port terminal operators are the followers of ocean carriers as well as the leaders of land carriers. For the individual carrier problems, Nash equilibrium is used to find the optimal decisions for which each carrier obtains the greatest profit. A three–level model is formulated to capture the interactions among different types of carriers. A numerical example is presented to demonstrate the validity and capability of the model.