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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.

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  • 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:

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    6. Li, Xishu & Zuidwijk, Rob & de Koster, M.B.M, 2023. "Optimal competitive capacity strategies: Evidence from the container shipping market," Omega, Elsevier, vol. 115(C).
    7. Haehl, Christian & Spinler, Stefan, 2020. "Technology Choice under Emission Regulation Uncertainty in International Container Shipping," European Journal of Operational Research, Elsevier, vol. 284(1), pages 383-396.
    8. Zheng, Shiyuan & Jiang, Changmin & Fu, Xiaowen & Ge, Ying-En & Shu, Jia, 2022. "Subsidies for green technology adoption under uncertain demand and incomplete information," Omega, Elsevier, vol. 112(C).
    9. Konstantinos Drakos & Dimitris Tsouknidis, 2024. "Investment under uncertainty and irreversibility: Evidence from the shipping markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 2139-2154, April.
    10. Mohammad Ghorbani & Michele Acciaro & Sandra Transchel & Pierre Cariou, 2022. "Strategic alliances in container shipping: A review of the literature and future research agenda," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 24(2), pages 439-465, June.
    11. Pouliasis, Panos K. & Papapostolou, Nikos C. & Kyriakou, Ioannis & Visvikis, Ilias D., 2018. "Shipping equity risk behavior and portfolio management," Transportation Research Part A: Policy and Practice, Elsevier, vol. 116(C), pages 178-200.
    12. Nikola Kutin & Patrice Guillotreau & Thomas Vallée, 2018. "Assessing competition on Maritime Routes in the Liner Shipping Industry through multivariate analysis," Working Papers halshs-01828643, HAL.
    13. Fan, Lixian & Gu, Bingmei & Yin, Jingbo, 2021. "Investment incentive analysis for second-hand vessels," Transport Policy, Elsevier, vol. 106(C), pages 215-225.
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