Optimal investments of port authorities facing ambiguity on uncertain market demands

This study explores how two competing port authorities facing ambiguity about uncertain market demands determine their optimal investments. Using the Choquet expected utility function, the port authorities are categorized into four types: ambiguity-averse and risk-averse, ambiguity-neutral and risk-averse, ambiguity-averse and risk-neutral, and ambiguity-neutral and risk-neutral. Each type can reach equilibria through no-port investing, only-one-port investing, or both-port investing. The authors' findings indicate that considering ambiguity does not alter the types of equilibrium investments for port authorities, regardless of their risk aversion or neutrality. However, the emergence of equilibrium investments for each type is affected by the consideration of ambiguity. Specifically, when risk-neutral port authorities transition from ambiguity-neutral to ambiguity-averse, they will invest more (less) if they are optimistic (pessimistic) enough. Nevertheless, this relationship may not apply to risk-averse port authorities, as the magnitudes of the first to the fourth moments of probability distributions, which maximize and minimize the expected utility of ports, also impact their investment decisions. Importantly, the authors' results hold true even when ports exhibit ambiguity-loving characteristics, possess distinct ambiguity or risk attitudes, consider Knight uncertainty, or compete in prices.

• Record URL:
  • https://doi.org/10.1016/j.trb.2023.102856
• Record URL:
  • http://www.sciencedirect.com/science/article/pii/S0191261523001819
• Availability:
  • Find a library where document is available. Order URL: http://worldcat.org/issn/01912615
• Supplemental Notes:
  • © 2023 Published by Elsevier Ltd. Abstract reprinted with permission of Elsevier.
• Authors:
  • Chen, Hsiao-Chi
  • Liu, Shi-Miin
• Publication Date: 2024-1

Language

• English

Media Info

• Media Type: Web
• Features: Appendices; References; Tables;
• Pagination: 102856
• Serial:
  • Transportation Research Part B: Methodological
  • Volume: 179
  • Issue Number: 0
  • Publisher: Elsevier
  • ISSN: 0191-2615
  • Serial URL: http://www.sciencedirect.com/science/journal/01912615

Subject/Index Terms

• TRT Terms: COVID-19; Investments; Markets; Port authorities; Risk assessment; Uncertainty
• Identifier Terms: World Trade Organization
• Subject Areas: Economics; Finance; Freight Transportation; Marine Transportation; Security and Emergencies; Terminals and Facilities;

Filing Info

• Accession Number: 01905786
• Record Type: Publication
• Files: TRIS
• Created Date: Jan 26 2024 10:02AM