Contract design in ocean shipping market: A performance credit leveraged mechanism

Jie Jin, Junliang He, Xudong Wang, Chuanfeng Han and Lingpeng Meng

International Journal of Production Economics, 2024, vol. 272, issue C

Abstract: In shipping market, the distinct characteristics of violating demand and fluctuating spot market price both in low-demand and high-demand seasons breed the problems of shippers defaulting in the low season and insufficient capacity in high season. Based on the appeal to lock in the market and capacity, the shipper's performance credit in low season as a lever mechanism is proposed in this paper to adjust the capacity obtained in high season and study the contract design problem between the carrier and the shipper in respond to the volatile shipping market. The results show that the mechanism encourages the shipper to re-weigh their actual capacity in low season. It enables the shipper to increase their committed capacity quantity and facilitates the carrier to maintain the benefits of planning capacity in advance. Meanwhile, the shipper may obtain more capacity in the high season without increasing costs. In addition, it is interesting to note that while contracting is consistently a preferrable option than solely relying on the spot market for the shipper, it's only true for the carrier when a certain threshold condition is reached, and on the contrary, it is more profitable to transact with the spot market.

Keywords: Ocean shipping supply chain; Pricing and contract; Contract default; Performance credit (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925527324001130
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:272:y:2024:i:c:s0925527324001130

DOI: 10.1016/j.ijpe.2024.109256

Access Statistics for this article

International Journal of Production Economics is currently edited by Stefan Minner

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().