Optimal pricing for ferry services with a new entrant: a game-theoretic perspective

Huibing Cheng, Su Xiu Xu, George Q. Huang, Saijun Shao, Gangyan Xu

Research output: Journal article publicationJournal articleAcademic researchpeer-review

Abstract

This paper investigates the pricing model between an incumbent ferry firm and a new-entrant sea bus firm. First, we study the influences of sea buses entering the ferry market. Next, based on the differences in power structures, we analyze the impact of weather on both companies’ operations in Bertrand and two Stackelberg models, and we consider a case in which both firms belong to the same parent firm. Finally, we study the strategies adopted by the ferry firm to protect its market share against the invasion of sea buses. We find that the sea bus firm’s entrance into the ferry market will increase the number of passengers taking ferries. Both companies’ profits are greater in the two Stackelberg models than in the Bertrand model. The two companies’ profits in the Stackelberg models partially rely on the weather. Finally, vicious price competition will lead to losses on both sides.

Original languageEnglish
JournalTransportmetrica A: Transport Science
DOIs
Publication statusAccepted/In press - 26 Jul 2021
Externally publishedYes

Keywords

  • Ferry service
  • game theory
  • optimal pricing
  • sea bus
  • Stackelberg model

ASJC Scopus subject areas

  • Transportation
  • Engineering(all)

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