A Strategic Model of Investment and Price Competition Among Container Ports

Countries throughout the world, and especially within Asia, are investing heavily in container port infrastructure in hopes of capturing a larger share of global shipping activity for their economies. Many existing ports are emphasizing developing the capacity to serve as a hub port, building deepwater berths with large terminals to facilitate transfer of containers from feeder ships to mother ships for intercontinental transport. The authors develop a game-theoretic best response framework of price and investment competition with spatially distributed (Hotelling) demand in order to understand how competitor ports will respond to development at a focus port, and whether the focus port will be able to capture or defend market share by building additional capacity. An economic experiment, in which human subjects play the role of port managers, finds the overinvestment and reduced profitability predicted by the model. The authors use Korean Customs data to estimate the responsiveness of shippers to port prices, and develop a partial equilibrium simulation model of worldwide demand for port services. The authors apply a simplified game model, necessitated by the data intensity of the exercise, to analyze the investment and competition currently occurring between the ports of Busan and Shanghai.

  • Record URL:
  • Supplemental Notes:
    • This research was funded by the U.S. Department of Transportation, University Transportation Centers Program.
  • Corporate Authors:

    University of Rhode Island, Kingston

    Department of Environmental and Natural Resource Economics
    Kingston, RI  United States  02881

    University of Rhode Island, Kingston

    Transportation Center, Carlotti Administration Building
    75 Lower College Road
    Kingston, RI  United States  02881
  • Authors:
    • Anderson, Christopher M
    • Chang, Young-Tae
    • Luo, Meifeng
    • Grigalunas, Thomas A
    • Trandafir, Simona C
    • Hwang, Jinsoo
    • Lee, Tae-Woo
    • Park, Yong-An
    • Yang, Chang-Ho
  • Publication Date: 2008-8

Language

  • English

Media Info

  • Media Type: Web
  • Edition: Final Report
  • Features: Figures; Maps; References; Tables;
  • Pagination: 121p

Subject/Index Terms

Filing Info

  • Accession Number: 01139669
  • Record Type: Publication
  • Report/Paper Numbers: URITC FY00-10
  • Contract Numbers: URI0001028
  • Files: UTC, TRIS
  • Created Date: Sep 17 2009 10:33AM