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Should ports expand their facilities under congestion and uncertainty?

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  • Chen, Hsiao-Chi
  • Liu, Shi-Miin

Abstract

This paper investigates simultaneous facility investments of risk-averse ports under congestion and uncertain market demand. We set up a two-period game, allowing two ports first choose their facility investment levels, and then decide their cargo-handling amounts and service prices. When investment costs of the two ports are large, the unique equilibrium is no investment. If investment costs of at least one port are small, then one or two ports will invest at equilibria. If both ports invest at equilibrium, they may become worse off than at non-equilibrium of no investment. This means that the ports may face a tradeoff between stability and efficiency. Moreover, we compare the behaviors of risk-averse and risk-neutral ports, as well as risk-averse ports’ behaviors under uncertainty and no-uncertainty. It is found that ports’ risk-averse degrees are the major factor determining their behaviors in different scenarios.

Suggested Citation

  • Chen, Hsiao-Chi & Liu, Shi-Miin, 2016. "Should ports expand their facilities under congestion and uncertainty?," Transportation Research Part B: Methodological, Elsevier, vol. 85(C), pages 109-131.
  • Handle: RePEc:eee:transb:v:85:y:2016:i:c:p:109-131
    DOI: 10.1016/j.trb.2015.12.018
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    References listed on IDEAS

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    Cited by:

    1. (Kevin) Park, Hyosoo & Chang, Young-Tae & Zou, Bo, 2018. "Emission control under private port operator duopoly," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 114(C), pages 40-65.
    2. Wang, Wei & Liu, Xiujuan & Ding, Lili & Li, Chen & Zhang, Wensi, 2018. "The optimal port privatization levels under inter-port competition: Considering both horizontal and vertical differentiation," Economics Discussion Papers 2018-84, Kiel Institute for the World Economy (IfW).
    3. Balliauw, Matteo & Kort, Peter M. & Zhang, Anming, 2019. "Capacity investment decisions of two competing ports under uncertainty: A strategic real options approach," Transportation Research Part B: Methodological, Elsevier, vol. 122(C), pages 249-264.
    4. Chen, Hong & Lam, Jasmine Siu Lee & Liu, Nan, 2018. "Strategic investment in enhancing port–hinterland container transportation network resilience: A network game theory approach," Transportation Research Part B: Methodological, Elsevier, vol. 111(C), pages 83-112.
    5. Asadabadi, Ali & Miller-Hooks, Elise, 2018. "Co-opetition in enhancing global port network resiliency: A multi-leader, common-follower game theoretic approach," Transportation Research Part B: Methodological, Elsevier, vol. 108(C), pages 281-298.
    6. Wan, Yulai & Basso, Leonardo J. & Zhang, Anming, 2016. "Strategic investments in accessibility under port competition and inter-regional coordination," Transportation Research Part B: Methodological, Elsevier, vol. 93(PA), pages 102-125.
    7. Randrianarisoa, Laingo M. & Zhang, Anming, 2019. "Adaptation to climate change effects and competition between ports: Invest now or later?," Transportation Research Part B: Methodological, Elsevier, vol. 123(C), pages 279-322.
    8. Song, Zhuzhu & Tang, Wansheng & Zhao, Ruiqing, 2018. "Cooperation mode for a liner company with heterogeneous ports: Business cooperation vs. port investment," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 118(C), pages 513-533.
    9. Li, Shuai & Cai, Hubo, 2017. "Government incentive impacts on private investment behaviors under demand uncertainty," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 101(C), pages 115-129.

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