Who canvasses for cargos? Incentive analysis and channel structure in a shipping supply chain

Fan Wang, Xiaopo Zhuo, Baozhuang Niu and Jiayi He

Transportation Research Part B: Methodological, 2017, vol. 97, issue C, 78-101

Abstract: Ocean shipping (OS) and inland shipping (IS) are vertically complementary services in the shipping supply chain. In practice, we have observed that both OS and IS companies canvass for cargos. In addition, we have observed that more and more IS companies are forming alliances to obtain a better price from the OS companies by hiring a negotiation agent. We solve the strategy matrix based on the following questions: “Who canvasses for cargos?” “Should a negotiation agent be hired?” We find that when an OS company canvasses for cargos, a negotiation agent can raise the IS service price; however, when IS companies canvass for cargos, a negotiation agent can weaken an OS company's monopolistic advantage. We show that there exists a win–win situation when an OS company canvasses for cargos without a negotiation agent and that this win–win situation is Pareto-optimal for all shipping supply chain parties. Interestingly, by comparing the equilibriums under optimal strategies and equilibrium strategies, we identify a lose–lose situation. That is, a classic Prisoner's Dilemma occurs when IS companies canvass for cargos and a negotiation agent is hired. We find that the shipping supply chain's overall profit and social welfare are maximized when an OS company canvasses for cargos and IS companies do not hire a negotiation agent.

Keywords: Cargo canvassing; Negotiation agent; Complementary shipping services; Game theory (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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DOI: 10.1016/j.trb.2016.11.007

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