Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/18752
Title: Post-entry container port capacity expansion
Authors: Luo, M 
Liu, L
Gao, F
Keywords: Capacity expansion
Market preemption
Port competition
Pricing
Issue Date: 2012
Publisher: Pergamon Press
Source: Transportation research. Part B, Methodological, 2012, v. 46, no. 1, p. 120-138 How to cite?
Journal: Transportation research. Part B, Methodological 
Abstract: Port capacity development is a critical strategy for the growth of a new port, as well as for the development of existing ones, when both new and existing ports serve the same hinterland but have different competitive conditions. To study this strategy, we develop a two-stage duopoly model that comprises the pricing and capacity decisions of two heterogeneous players serving an increasing market. We identify the necessary condition for a port to increase its profit through capacity expansion, and characterize the condition when preemptive pricing by the dominant player is neither credible nor effective in preventing the smaller player from gaining market share. We also find the pure-strategy Nash equilibrium in the capacity expansion game for two ports that have different price sensitivities, as well as different operation and capacity investment costs. We apply the model results to the container port competition between Hong Kong and Shenzhen after Shenzhen port started its container operation in 1991. Our analysis explains the transition of market power from monopoly to duopoly, the fast development of Shenzhen Port, and the possible market structure changes with the continuing increase in demand.
URI: http://hdl.handle.net/10397/18752
ISSN: 0191-2615
EISSN: 1879-2367
DOI: 10.1016/j.trb.2011.09.001
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