A simple game theoretical analysis for incentivizing multi-modal transportation in freight supply chains

Zhuzhu Song, Wansheng Tang and Ruiqing Zhao

European Journal of Operational Research, 2020, vol. 283, issue 1, 152-165

Abstract: Multi-modal transportation, as a highly efficient approach, can economize many intermediate links in the supply chain and save social operating costs. However, at present, multi-modal transportation accounts for only a small portion of the total traffic volume, and there are few multi-modal carriers. To analyze the incentives of ocean shipping companies to provide multi-modal transportation, this paper considers a freight supply chain composed of two upstream ocean shipping companies and two downstream railway transportation companies. After depicting a Nash game between the two competing ocean shipping companies in terms of whether to integrate downstream railway transportation services to provide multi-modal transportation, we analyze the performance of the participants in sub-games for each integration strategy. The results indicate that regardless of competitor behavior, ocean shipping companies may have an incentive to provide multi-modal transportation. Although the two ocean shipping companies are unlikely to agree on the optimal strategy, the only effective equilibrium they can achieve is both providing multi-modal transportation. Moreover, in this equilibrium, the supply chain’s profit, consumer utility and social welfare are likely to be maximized. In addition, although the provision of multi-modal transportation will attract more shippers to the market, whether more shippers can ultimately be retained depends on the integration efficiency and competitive intensity.

Keywords: Supply chain management; Multi-modal transportation; Ocean shipping; Railway transportation; Nash game (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:283:y:2020:i:1:p:152-165

DOI: 10.1016/j.ejor.2019.10.048

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