Investment modes in dry port with network effect under regionally competitive environment

As an efficient bridge linking the mainland and overseas, dry ports can not only revitalize the regional economy but also promote the growth of seaport throughput. However, the construction of dry ports is a long-cycle and high-consumption project, and it is necessary to coordinate the interests of all parties at the early stage of construction and fully consider the impact of the completed dry port on the seaport and the local economy. Therefore, this paper considers two Port Operators A and B, and Port Operator A decided to invest in dry port to upgrade and expand. We investigate under what conditions Port Operator A should establish what scale of dry port in the face of the increasingly complex competitive environment and shippers' port selection behavior. For that, we take two seaports as a kind of network product, and analyze the necessity and feasibility conditions for Port Operators to invest in the construction of dry ports by applying the economic theory of network effect on the basis of the improved Hotelling model. The results show that even if the network effect is low, if the shippers bear a low unit transportation cost, the construction of dry ports can not only help Port Operator A to enhance competitiveness but also promote the development of Social Welfare. If the network effect intensity is high, Port Operator A can realize rapid expansion by taking advantage of the high service quality of dry ports, but the scale of dry port should be controlled within a certain range.