Multidimensional container shipping alliance decisions among competitors: Impact of capacity constraints and market competition

Over the past decade, intensified competition in the global market has led to unprecedented changes in the structure of shipping alliances. To explicate the underlying motivation and extensive implications of such changes, this study utilizes a multi-player competitive game theory framework and examines two types of shipping lines based on their heterogeneous shipping capacities. The post-alliance entity competes for volume on the same route with the remaining shipping lines based on their respective capacities. We deduce individual alliance preferences and equilibrium alliance structures by examining a range of distinct market conditions. Our analysis shows that active super-alliance is likely to transform into a passive mode if smaller shipping lines increase their capacity, and in such circumstances, they tend to create a mixed-alliance structure by pursuing partnerships with smaller shipping lines. Although shipping alliances are often formed to create benefits for members, competitive market conditions reshape alliance intentions, theoretically reducing the number of direct competitors, but paradoxically intensifying the rivalry among the alliance members. Additionally, the homogeneity in members’ capacity within such alliances can precipitate a transformation from a mutually advantageous “win–win” situation to a contentious “win-lose” situation, and even a misguided “lose-lose” situation. Our findings demonstrate that in contexts where the small shipping line functions with constrained capacity, the mixed-alliance structure is beneficial to increase consumer surplus and social welfare.