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Investment into container shipping capacity: A real options approach in oligopolistic competition

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  • Rau, Philipp
  • Spinler, Stefan

Abstract

We develop a container industry-specific real options investment model in oligopolistic competition taking into account endogenous price function, fuel-efficient investment, endogenous lead times, and endogenous price formation in the second-hand vessel market. We assess how optimal capacity is influenced by competitive intensity, number of players, volatility, fuel-efficiency, lead time, and cost. Moreover, we investigate optimal investment policies. We find that strategic action increases firm value and that it is worthwhile to consider alliances. Additionally, players in the market should consider retrofitting old vessels for fuel economy in economic downturns and using new, fuel-efficient vessels for capacity expansion in market upswings.

Suggested Citation

  • Rau, Philipp & Spinler, Stefan, 2016. "Investment into container shipping capacity: A real options approach in oligopolistic competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 93(C), pages 130-147.
  • Handle: RePEc:eee:transe:v:93:y:2016:i:c:p:130-147
    DOI: 10.1016/j.tre.2016.05.012
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    Cited by:

    1. repec:eee:transe:v:115:y:2018:i:c:p:164-212 is not listed on IDEAS
    2. repec:eee:transe:v:113:y:2018:i:c:p:75-93 is not listed on IDEAS
    3. repec:eee:transe:v:107:y:2017:i:c:p:120-140 is not listed on IDEAS
    4. Rau, Philipp & Spinler, Stefan, 2017. "Alliance formation in a cooperative container shipping game: Performance of a real options investment approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 101(C), pages 155-175.
    5. repec:eee:transe:v:106:y:2017:i:c:p:98-114 is not listed on IDEAS

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