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Optimal investment strategy in a container terminal: A game theoretic approach

Author

Listed:
  • Isam Kaysi

    (Department of Civil and Environmental Engineering, American University of Beirut)

  • Nabil Nehme

    (Department of Industrial Engineering, Lebanese American University)

Abstract

This article investigates the optimal strategy for potential investments that may be adopted by port authorities to attract more carriers. A mathematical model is formulated to represent the main criteria used by carriers to evaluate a specific port. Then, a game theory approach is used to model the competition between several port authorities to attract carriers via maximizing their utility functions. The game type suggested is Sealed-Bid with one round. The results indicate that the optimal investment strategy used by a specific port is dependent on (i) the port’s current state with respect to other competing ports; (ii) resource availability in terms of manpower and funds; (iii) expected profitability and (iv) other players’ reaction toward investment. This study advises the port authority on maximizing the payoff in case of winning the bid by selectively investing in the port and minimizing the potential loss in case of losing the bid by refraining from performing any investment.

Suggested Citation

  • Isam Kaysi & Nabil Nehme, 2016. "Optimal investment strategy in a container terminal: A game theoretic approach," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 18(3), pages 250-263, September.
    • Handle: RePEc:pal:marecl:v:18:y:2016:i:3:d:10.1057_mel.2015.7
    DOI: 10.1057/mel.2015.7
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    References listed on IDEAS

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    1. Osborne, Martin J., 2009. "Introduction to Game Theory: International Edition," OUP Catalogue, Oxford University Press, number 9780195322484.
    2. Chinonye Ugboma & Ogochukwu Ugboma & Innocent C Ogwude, 2006. "An Analytic Hierarchy Process (AHP) Approach to Port Selection Decisions – Empirical Evidence from Nigerian Ports," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 8(3), pages 251-266, September.
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    6. Saeed, Naima & Larsen, Odd I., 2010. "An application of cooperative game among container terminals of one port," European Journal of Operational Research, Elsevier, vol. 203(2), pages 393-403, June.
    7. Alfred J Baird, 2000. "Port Privatisation: Objectives, Extent, Process, and the UK Experience," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 2(3), pages 177-194, September.
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    Cited by:

    1. Nabil Nehme & Bacel Maddah & Isam A. Kaysi, 2021. "An integrated multi-ship crane allocation in Beirut Port container terminal," Operational Research, Springer, vol. 21(3), pages 1743-1761, September.
    2. Zheng, Shiyuan & Jiang, Changmin & Fu, Xiaowen, 2021. "Investment competition on dedicated terminals under demand ambiguity," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 150(C).
    3. Bin Meng & Haibo Kuang & Erxuan Niu & Jing Li & Zhenhui Li, 2020. "Research on the Transformation Path of the Green Intelligent Port: Outlining the Perspective of the Evolutionary Game “Government–Port–Third-Party Organization”," Sustainability, MDPI, vol. 12(19), pages 1-25, September.

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