OnDemand WTP Pricing Research

Tacit Collusion of Pricing Strategy Game between Regional Ports: The Case of Yangtze River Economic Belt | MDPI

Abstract:

We develop a game model to analyze the tacit collusion between regional ports under three different scenarios. In the first scenario, there is simultaneous pricing game between regional ports; this intends to depict pricing strategy adopted independently. In the second, we consider two competing ports that make sequential pricing decisions. Thirdly, an infinitely repeated game model is then formulated for regional ports to test the stability of Nash equilibrium. Our main finding is that there is a certain degree of tacit collusion of pricing strategy between regional ports in the competitive environment; in particular, the tacit collusion of pricing strategy will gradually stabilize with the increasing number regional ports games. A case study of Yangtze River Economic Belt is provided to illustrate the results.

1. Introduction

While overall prospects for port activity remain bright, today’s port-operating landscape is characterized by heightened port competition, especially in the container market segment, where decisions by shipping alliances regarding capacity deployed, ports of call and network structure can determine the fate of a container port. Under this background, further enhancing container port performance in regional market is increasingly recognized as critical for port planning, investment positioning and strategy pricing, as well as for meeting globally established sustainability benchmarks and objectives such as the Sustainable Development Goals [1].
As an important basic industry in the national economic system, the port plays an important role in the improvement of the country’s comprehensive capability and the development of the regional economy in China. On 12 July 2017, the Ministry of Transport of the People’s Republic of China (MOT) and National Development and Reform Commission (NDRC) issued the latest “Port Tariff and Charging Method” to deregulate port pricing formation mechanism. According to the method, port tariff will be transformed from mainly depending on government pricing into government guidance, such as cargo dues, pilotage fees, tug fees, parking fees, special trimming charges for oil fences, etc. Particularly, the competitive services of port will be changed from uniform pricing into being based on market regulations.
Accompanied by the deregulation of port tariff policy, the protection and restoration of regional ports ecological environment have been given the first priority, particularly in Yangtze River Economic Belt. In the past 40 years of reform and opening up, the ecosystem of the Yangtze River Economic Belt has suffered serious damage due to the failure to deal with the relationship between human and nature in the process of rapid economic development and urban expansion. The main ecological and environmental problems include soil erosion in the upper reaches, frequent floods, lake eutrophication, soil salinization, pollution of heavy metals and persistent organic compounds and loss of biodiversity in the middle and lower reaches. Besides the impact of global climate change, the frequent occurrences of soil erosion in the upper reaches and flood disasters in the middle and lower reaches are mainly due to the significant reduction of surface vegetation caused by human activities, such as urbanization, mining, deforestation and reclamation, shipping pollution, as well as large-scale port construction and operation, etc.

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