Privileged or ordinary carrier: strategic choice in a competitive environment

Abstract

ABSTRACT Facing the increasing demand for ocean transportation, transport participants are seeking new ways of cooperation to improve overall productivity. In this study, we suppose a terminal operator would propose an agreement, in which carriers who choose to sign the agreement with the terminal operator could be a privileged carrier, otherwise they can only be an ordinary one. The berth requirements of privileged carriers will be satisfied in priority, resulting in certain operation efficiency improvements. A non-cooperative model is proposed to investigate two competing carriers of two transportation chains about whether to be the privileged carrier. It is noticed that the equilibrium strategies for two carriers are always the same. The operation efficiency and intensity of competition are the two key factors influencing the optimal strategy. When the efficiency improvement is at an appropriate level, it is more profitable for carriers to sign the agreement with the terminal operator. When the operation efficiency is at a high level and intensity of competition between two carriers is comparatively greater, the Pareto-optimal strategy will be selected to be the ordinary carrier. Furthermore, we discuss some extensions to prove the robustness of our main insights.