Vertical integration and capacity investment in a two-port system

Changmin Jiang, Xiaowen Fu, Ying En Ge, Shengda Zhu, Shiyuan Zheng, Yi bin Xiao

Research output: Journal article publicationJournal articleAcademic researchpeer-review

4 Citations (Scopus)

Abstract

We model the vertical investment of a container shipping line in the port capacity in a two-port system. Our analytical and numerical analyss suggests that the relative scale of the capacity investment depend on the initial port capacity and the relationship between the ports. When a port has a sufficiently large initial capacity and the ports do not have highly complementary operations, a vertical investment leads to higher investments. Moreover, the investment of a shipping line in a port always increases its own profit and reduces the competitor’s profit. However, when compared with port self-investment, vertical investment always reduces the local social welfare.

Original languageEnglish
Pages (from-to)1431-1459
Number of pages29
JournalTransportmetrica A: Transport Science
Volume17
Issue number4
DOIs
Publication statusPublished - 2021

Keywords

  • capacity investment
  • container shipping
  • Port
  • revenue sharing
  • vertical integration

ASJC Scopus subject areas

  • Transportation
  • Engineering(all)

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