Capacity investment decisions of two competing ports under uncertainty: A strategic real options approach

Balliauw, Matteo; Kort, Peter M.; Zhang, Anming

doi:10.1016/j.trb.2019.01.007

Cited by 67 publications

(22 citation statements)

References 44 publications

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“…They concluded that when the investment capacities of port cities are approximately the same, all port cities will actively invest in their ports, and a city’s higher average investment return may decrease its willingness to invest in its ports. Balliauw et al ( 21 ) analyzed how inter-port competition under uncertainty interacts with other typical port characteristics while influencing the port capacity investment decision. Wang et al ( 22 ) established a non-cooperative game model, deduced the optimal equilibrium result of the port’s investment expansion strategy and investment constant strategy, and concluded that port investment expansion is one of the most effective solutions to alleviate port congestion and improve long-term competitiveness.…”

Section: Literature Reviewmentioning

confidence: 99%

Inter-Port Competition and Cooperation Under Different Market Environments

Yuan

Wang

Qiang

2021

Transportation Research Record: Journal of the Transportation R

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Aiming at the competition and cooperation decision-making problem between two ports in the same regional port group, this paper studies four kinds of dynamic game scenarios of two adjacent ports—namely, independent strategy–independent strategy (i.e., DD combinations), independent strategy–integrated strategy (i.e., DT combinations), integrated strategy–independent strategy (i.e., TD combinations), and integrated strategy–integrated strategy (i.e., TT combinations). By introducing port demand models and using the dynamic game method, the paper performs a comparative study of port service pricing, port demand, and port profit in different combinations of competition and cooperation. The results show that taking port profit as payment function, the equilibrium strategy of the leader port is the independent strategy, which is also the dominant strategy, while the independent strategy or integrated strategy of the follower port depends on the degree of service substitution provided by the two competing ports. When the degree of service substitution is low (0 < γ < 0.53), the equilibrium strategies of two competing ports are the DD combinations, but the equilibrium strategies can be improved by Pareto, and further analysis shows that TT combinations are the Pareto equilibrium strategies at this time. By contrast, when the degree of service substitution provided by the two competing ports is high (0.53 ≤γ < 1), the DT combinations are the equilibrium strategies of the two competing ports, which are also the Pareto equilibrium strategies at this time. The research shows that when the degree of service substitution of the two ports is low, to encourage the two ports to carry out differentiated development of service functions, it is conducive to promote the two ports to adopt the integrated cooperation strategies.

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Section: Literature Reviewmentioning

confidence: 99%

Inter-Port Competition and Cooperation Under Different Market Environments

Yuan

Wang

Qiang

2021

Transportation Research Record: Journal of the Transportation R

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“…Depending on the geographical location and the services offered, the degree of competence may differ [ 8 ] and in certain circumstances, a certain degree of collaboration may be more interesting than competition among different ports. This is the case of the adjacent ports, where it is particularly interesting to study the possibilities of competition and cooperation between them [ 47 ].…”

Section: Relevant Literaturementioning

confidence: 99%

Identifying port maritime communities: application to the Spanish case

García¹,

Adenso‐Díaz²,

Calzada-Infante³

2021

Eur. Transp. Res. Rev.

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The aim of this paper is to detect port maritime communities sharing similar international trade patterns, by a modelisation of maritime traffic using a bipartite weighted network, providing decision-makers the tools to search for alliances or identify their competitors. Our bipartite weighted network considers two different types of nodes: one represents the ports, while the other represents the countries where there are major import/export activity from each port. The freight traffic among both types of nodes is modeled by weighting the volume of product transported. To illustrate the model, the Spanish case is considered, with the data segmented by each type of traffic for a fine tuning. A sort of link prediction is possible, finding for those communities with two or more ports, countries that are part of the same community but with which some ports do not have yet significant traffic. The evolution of the traffics is analyzed by comparing the communities in 2009 and 2019. The set of communities formed by the ports of the Spanish port system can be used to identify global similarities between them, comparing the membership of the different ports in communities for both periods and each type of traffic in particular.

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“…Randrianarisoa and Zhang (2019) evaluated the waiting option, with adaptation to the effects of climate change and competition between ports. Balliauw et al (2019) modelled options and the impact of competition between ports in their decision to invest in increasing capacity, having the flexibility to postpone investments.…”

Section: Introductionmentioning

confidence: 99%

Port capacity expansion under real options approach: a case study in Brazil

Assis

Silva

Gomes

et al. 2022

Ind. Jour. Manag. & Prod.

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Investments in port container terminals are sensitive to uncertainties. Public investments in infrastructure have been significantly reduced in the last decade in developing countries. The Brazilian government infrastructure investment was only 1.85 % of GDP in 2019, representing the lowest level in the last fifty years. Nonetheless, the regulatory framework of the port sector in Brazil has undergone significant changes over time, increasing the number of private port container terminal leases. The expansion capacity of the private port facilities is strongly linked to the demand uncertainty, which impacts the financial return to the long run. In this scenario, the uncertainty of global cargo transportation can discourage infrastructure investments in this class of project in Brazil. To overcome these issues, the financial modelling applying real options approach is better suited than the traditional valuation methods based on Discounted Cash Flow (DCF) analysis. The present study aims to value flexibilities of anticipating, or postponing, or interrupting investments of an existing operational port terminal in Brazil with expansion capacity under the demand uncertainty. The financial decision to invest in a port expansion is modeled by an American option. The results demonstrate that the investor adds significant value to the project by having the possibility to postpone investments. The proposed model presents the contribution of optimizing the decision of sequential expansions of capacity in port terminals, at any time and according to scenarios' revelation. In addition, the model allows the government authorities to review lease contracts, considering the relevance of timing to invest in project expansion decisions. The proposed model can also be extended to other infrastructure projects in emerging economies.

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Capacity investment decisions of two competing ports under uncertainty: A strategic real options approach

Cited by 67 publications

References 44 publications

Inter-Port Competition and Cooperation Under Different Market Environments

Inter-Port Competition and Cooperation Under Different Market Environments

Identifying port maritime communities: application to the Spanish case

Port capacity expansion under real options approach: a case study in Brazil

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