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Securing the Containerized Supply Chain: Analysis of Government Incentives for Private Investment

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  • Nitin Bakshi

    (London Business School, Regent's Park, London NW1 4SA, United Kingdom)

  • Noah Gans

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

Abstract

To mitigate the threat that terrorists smuggle weapons of mass destruction into the United States through maritime containers, the U.S. Bureau of Customs and Border Protection (CBP) inspects containers upon entry to domestic ports. Inspection-driven congestion is costly, and CBP provides incentives to firms to improve security upstream in the supply chain, thereby reducing the inspection burden at U.S. ports. We perform an economic analysis of this incentive program, called Customs-Trade Partnership Against Terrorism (C-TPAT), modeling in a game-theoretic framework the strategic interaction between CBP, trading firms, and terrorists. Our equilibrium results highlight the possibility that a properly run program can efficiently shift some of CBP's security burden to private industry. These results also suggest that CBP may have the opportunity to use strategic delay as an incentive for firms to join. Analysis of comparative statics shows that, with increasing capacity, membership in C-TPAT systematically declines.

Suggested Citation

  • Nitin Bakshi & Noah Gans, 2010. "Securing the Containerized Supply Chain: Analysis of Government Incentives for Private Investment," Management Science, INFORMS, vol. 56(2), pages 219-233, February.
    • Handle: RePEc:inm:ormnsc:v:56:y:2010:i:2:p:219-233
    DOI: 10.1287/mnsc.1090.1105
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Martina de Gramatica & Fabio Massacci & Woohyun Shim & Uğur Turhan & Julian Williams, 2017. "Agency Problems and Airport Security: Quantitative and Qualitative Evidence on the Impact of Security Training," Risk Analysis, John Wiley & Sons, vol. 37(2), pages 372-395, February.
    2. Pourakbar, M. & Zuidwijk, R.A., 2018. "The role of customs in securing containerized global supply chains," European Journal of Operational Research, Elsevier, vol. 271(1), pages 331-340.
    3. Yeo, Gi-Tae & Pak, Ji-Yeong & Yang, Zaili, 2013. "Analysis of dynamic effects on seaports adopting port security policy," Transportation Research Part A: Policy and Practice, Elsevier, vol. 49(C), pages 285-301.
    4. Wang, Shuaian & Meng, Qiang, 2013. "Reversing port rotation directions in a container liner shipping network," Transportation Research Part B: Methodological, Elsevier, vol. 50(C), pages 61-73.
    5. Bagchi, Aniruddha & Paul, Jomon A., 2017. "Espionage and the optimal standard of the Customs-Trade Partnership against Terrorism (C-TPAT) program in maritime security," European Journal of Operational Research, Elsevier, vol. 262(1), pages 89-107.
    6. Nitin Bakshi & Stephen E. Flynn & Noah Gans, 2011. "Estimating the Operational Impact of Container Inspections at International Ports," Management Science, INFORMS, vol. 57(1), pages 1-20, January.
    7. Wang, Shuaian & Meng, Qiang & Liu, Zhiyuan, 2013. "Bunker consumption optimization methods in shipping: A critical review and extensions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 53(C), pages 49-62.
    8. Andres F. Jola-Sanchez & Juan Camilo Serpa, 2021. "Inventory in Times of War," Management Science, INFORMS, vol. 67(10), pages 6457-6479, October.
    9. Tong, Xun & Lai, Kee-hung & Lo, Chris K.Y. & Cheng, T.C.E., 2022. "Supply chain security certification and operational performance: The role of upstream complexity," International Journal of Production Economics, Elsevier, vol. 247(C).
    10. Brian M. Lewis & Alan L. Erera & Maciek A. Nowak & White Chelsea C., 2013. "Managing Inventory in Global Supply Chains Facing Port-of-Entry Disruption Risks," Transportation Science, INFORMS, vol. 47(2), pages 162-180, May.
    11. Song, Cen & Zhuang, Jun, 2017. "N-stage security screening strategies in the face of strategic applicants," Reliability Engineering and System Safety, Elsevier, vol. 165(C), pages 292-301.
    12. Wang, Shuaian & Qu, Xiaobo & Yang, Ying, 2015. "Estimation of the perceived value of transit time for containerized cargoes," Transportation Research Part A: Policy and Practice, Elsevier, vol. 78(C), pages 298-308.
    13. Liu, Dehai & Xiao, Xingzhi & Li, Hongyi & Wang, Weiguo, 2015. "Historical evolution and benefit–cost explanation of periodical fluctuation in coal mine safety supervision: An evolutionary game analysis framework," European Journal of Operational Research, Elsevier, vol. 243(3), pages 974-984.
    14. Wang, Xiaofang & Zhuang, Jun, 2011. "Balancing congestion and security in the presence of strategic applicants with private information," European Journal of Operational Research, Elsevier, vol. 212(1), pages 100-111, July.
    15. Mohammad Ebrahim Nikoofal & Morteza Pourakbar & Mehmet Gumus, 2023. "Securing containerized supply chain through public and private partnership," Production and Operations Management, Production and Operations Management Society, vol. 32(7), pages 2341-2361, July.
    16. Douglas Cumming & Sofia Johan, 2015. "Cameras tracking shoppers: the economics of retail video surveillance," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 235-257, December.
    17. Amir Gharehgozli & Nima Zaerpour & Rene Koster, 2020. "Container terminal layout design: transition and future," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 22(4), pages 610-639, December.
    18. Pengfei Guo & Zhe George Zhang, 2013. "Strategic Queueing Behavior and Its Impact on System Performance in Service Systems with the Congestion-Based Staffing Policy," Manufacturing & Service Operations Management, INFORMS, vol. 15(1), pages 118-131, September.
    19. Ralf Elbert & Holger Pontow & Alexander Benlian, 2017. "The role of inter-organizational information systems in maritime transport chains," Electronic Markets, Springer;IIM University of St. Gallen, vol. 27(2), pages 157-173, May.
    20. Ge, Zehui & Hu, Qiying & Goh, Chon-Huat & Zhao, Rui, 2021. "Action-dependent commitment in vertical collaborations: The effect of demand-creating innovations in a supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 147(C).
    21. Pala, Ali & Zhuang, Jun, 2018. "Security screening queues with impatient applicants: A new model with a case study," European Journal of Operational Research, Elsevier, vol. 265(3), pages 919-930.
    22. Bakker, Craig & Webster, Jennifer B. & Nowak, Kathleen E. & Chatterjee, Samrat & Perkins, Casey J. & Brigantic, Robert, 2020. "Multi-Game Modeling for Counter-Smuggling," Reliability Engineering and System Safety, Elsevier, vol. 200(C).
    23. Gharehgozli, A.H. & Roy, D. & de Koster, M.B.M., 2014. "Sea Container Terminals," ERIM Report Series Research in Management ERS-2014-009-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    24. Andres F. Jola‐Sanchez, 2022. "How does warfare affect firms' productivity?," Production and Operations Management, Production and Operations Management Society, vol. 31(5), pages 1940-1962, May.

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