The Role of Port Size and Incentives in the Choice of Location by Port Users: A Game-Theoretic Approach

Abstract

Fierce inter-port competition requires to strategically consider the roles port size and incentives play in a port user's port selection. This paper contributes to literature by developing a simple game-theoretic model to address this particular issue. We demonstrate that once port is selected the port size and the administered incentive level positively influences the level of port user's production; that the port's marginal cost incentive rate can change the firm's location given the relative size of the ports; the changes in the incentive level set at one port should be more than the inversed relative port size to the other port.