Impact of number of shipping lines on ports' charges and profits : a game-theoretic model

Abstract

This study examines the effect of changes in the number of shipping lines on port charges and profits. A two-stage noncooperative game-theoretic model with two ports and multiple identical shipping lines is developed. In the first stage, the ports decide their container handling charges, and in the second stage, the shipping lines decide on the number of calls to make at each port, given the port charges. The model is then applied to the case of competition between two ports in New Zealand, the Port of Tauranga and the Port of Auckland, to derive managerial insights. Our study extends the literature on port competition by incorporating competition between shipping lines. We also demonstrate that a decrease in the number of shipping lines may force ports to increase their handling charges. Furthermore, we show that each shipping line ships more cargo than the industry optimal via the port with lower costs.