Applications of Game Theory for Co-opetition at Marine Container Terminals

In recent years, the maritime shipping industry has endured overcapacity, volatile freight rates, and rising debts, resulting in the creation of large shipping alliances and increased vessel sizes. These changes have increased shipping alliance negotiating power over ports and pressure for more favorable conditions and improved services. Constrained by capacity expansion limitations (e.g., lack of land, high cost of expansion, etc.) while trying to accommodate the growing demand, have brought attention to the importance of planning and operations optimization to increase productivity and profits. In this dissertation, we present the developed game theory models that could assist the maritime container terminal operators and port authorities in their decision-making on the seaport and marine container terminal cooperation and competition. In total, four cooperation game theory models are presented with cooperation policies modeled using the Nash Bargaining Solution, total profit maximization, total minimum profit maximization, the difference of minimum profit maximization, and Shapley Value. Results indicate that the Nash Bargaining Solution and total profit maximization policies outperform the total minimum profit maximization and the difference of minimum profit maximization when a combined uniformity of profit share among the cooperating terminals and size are considered. The Nash Bargaining Solution has a slight edge over the total profit maximization policy as it provides better profits increase for the terminal with the higher V/C ratio and better uniformity. Two mathematical formulations were developed for capacity sharing one based on volume (i.e., demand is measured in TEUs) and one based on vessel (i.e., demand is measured in TEUs per vessel). Results indicate that planning level models provide significant difference to tactical/operational level models with regards to demand diversion between the terminals and overestimation of profits