Research on horizontal integrating strategy pricing game of competitive ports

Abstract

The homogenization of port services makes the competition among ports fierce. The long construction cycle makes it difficult for port companies to launch new differentiated services. Adopting horizontal integrating strategy to form a regional port group could more or less avoid the over competition for ports. In order to study the change of port companies’ profit, market share from adopting horizontal integrating strategy, this paper developed a multi-objective optimization pricing game model for port companies based on game theory and MNL discrete choosing model and solved the pure strategy nash equilibrium with an numerical algorithm. From the numerical example, we obtained the optimized pricing strategies, integrating routes for highway transportation service as well as sensitivity analysis of user preference factor in the context of horizontal integrating strategy. The result shows that: When user preference factor is 0.008, adopting horizontal integrating strategy could bring 103% profit promotion for port company A and 45% for port company B. While such measure would reduce the profit from adopting vertical integrating strategy. Therefore port companies decide to cancel some integrating routes in both ends of the network in order to reduce the costs. Moreover, there’s a collusion between two companies after adopting horizontal strategy. Decision making of both companies will aim at maximizing the profit of the group. Finally, the sensitivity analysis shows that with the growing of user preference factor θ, profit of regional port group will become stable after a decrease while the difference of profit between two companies become larger. It’s suggested that the regional port group should redistributes the profit so that the cooperation could be more persistent. Finally, port companies should also pay attention to self-development to avoid the profit loss when cooperation breaks or competition from outside.