Port governance in the post COVID-19 pandemic era: Heterogeneous service and collusive incentive

Abstract

In the post COVID-19 pandemic era, collusion strategy has been attempted to confront fierce market competition in container shipping supply chains. Three typical collusion scenarios are constructed as follows: i) none of the two pairs of shipping chains colludes; ii) both pairs collude; and iii) only one pair colludes. This paper developed a two-stage game model to study the optimal strategies of the container terminals and corresponding liner companies. The container ports set terminal handling charge (THC) to pursue optimal profits at the first stage, and then liner companies choose freight rate to obtain corresponding optimal profits at the second stage. Further, we analyzed the collusive incentives of the THC difference between heterogeneous terminals and the impact of the freight rate difference between heterogeneous container liners. In particular, the possibility of deviation from collusion and the decision of capacity expansion of container terminal are discussed through theoretical analysis. The results show that the optimal THC of a container terminal and freight rate of a container liner are both highly related to the capacity of the container terminal, which is profoundly influenced by the different structures of its collusion. Finally, the empirical study proves the theoretical result and the implications of port governance are subsequently discussed.