Optimal quality design of smart technologies for port digitalization: A game theoretical approach under digitalization synergy

Smart ports improve operational efficiency through innovative technologies and data-driven solutions. A key strategic decision in the digitalization process is the quality level of smart technologies adopted. This paper examines optimal quality design under the landlord port model framework, where a port authority and a terminal operator jointly influence digital transformation. We develop three game-theoretic models to analyze how governance structures, digitalization synergy and transition uncertainties affect quality and pricing decisions as well as port performance. We first examine a profit-maximizing base model and find that both stakeholders choose the same quality level to fully capture digitalization synergy. We then investigate a social welfare–maximizing model, where the port authority acts as a social planner. We find that both stakeholders invest in higher quality technologies and the port authority overinvests relative to the terminal operator to enhance social welfare. We lastly extend the base model to incorporate real-world uncertainties through a transitional period, where traditional and smart services coexist. Numerical analysis shows that under moderate to high transition uncertainties, the port authority tends to invest in higher quality. However, when transition uncertainties are low, or when strong synergy mitigates the risks associated with high uncertainties, the terminal operator chooses higher quality level. Our findings highlight the critical role of synergy, public governance, and transition uncertainty in the port digitalization process.