Pricing with risk sensitive competing container shipping lines: Will risk seeking do more good than harm?

Choi, Tsan‐Ming; Chung, Sai Ho; Zhuo, Xiaopo

doi:10.1016/j.trb.2020.01.003

Cited by 55 publications

(14 citation statements)

References 38 publications

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“…A number of studies have concentrated on risk-averse behavior in supply chains by employing the following three typical methods, namely, value-at-risk (VaR, see the pioneering work by Luciano et al ( 2003 ) and Tapiero ( 2005 )), conditional value-at-risk (CVaR, see Wu et al ( 2006 )), and mean–variance (MV, see Chiu and Choi ( 2016 ), Wang et al ( 2019 ), Choi et al ( 2020 )). Choi and Chiu ( 2012 ) provide a comprehensive review on risk analysis employing VaR, CVaR, and MV in stochastic supply chains and demonstrate that risk aversion is commonly incorporated in supply chains management studies without financial constraint.…”

Section: Literature Reviewmentioning

confidence: 99%

Financing the capital-constrained online retailer with risk aversion: coordinating strategy analysis

et al. 2022

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This paper considers a capital-constrained online retailer (OR) selling products through an e-commerce platform (EP) who also offers financial services to retailers. During the selling season, the OR exerts an effort to promote market demand through activities like sales promotions, advertising and live-streaming selling events. To investigate the EP-based financing scheme, a game-theoretic model is developed where the EP functions as the leader determining the interest rate and platform usage fee rate, and the OR functions as the follower determining the order quantity and effort level. We explore the impacts of the OR’s risk-aversion and find that when the OR is risk-averse (1) she sets a high effort level, and the EP sets a high usage fee rate; (2) a high risk-averse OR orders less products than low risk-averse OR. We design specific revenue-cost sharing contracts to coordinate the supply chain and demonstrate that the designed contracts are feasible. Moreover, we find that the OR consistently prefers EP financing compared to bank financing.

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Section: Literature Reviewmentioning

confidence: 99%

Financing the capital-constrained online retailer with risk aversion: coordinating strategy analysis

et al. 2022

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“…Research on the risk attitude of decision‐makers includes risk aversion (Choi et al., 2008; Shen et al., 2019b; Choi et al., 2019; Yuan et al., 2020), risk‐seeking (Arcelus et al., 2006; Choi et al., 2020; Zhao et al., 2021), prospect theory (Schweitzer and Cachon, 2000; Liu et al., 2015), expected utility theory (Kadota et al., 1998; Agrawal and Seshadri, 2000a, 2000b; Monroy et al., 2017), and so on. The behavior of optimism in our paper could be regarded as a kind of risk‐seeking attitude, and only few works study the impacts of optimism on business decision‐making.…”

Section: Literature Reviewmentioning

confidence: 99%

Pricing and entry strategies for competitive firms with optimistic entrant

Xiao

2021

Int Trans Operational Res

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Entrepreneurs are usually optimistic when entering an existing market. We introduce the entrant's optimism into the game models of entry deterrence to study the entry strategy of the potential entrant and the pricing (deterrence) strategy of the incumbent. Further, we examine the impacts of the entrant's optimism on the optimal decisions for both firms in the post‐entry game (Stackelberg price competition). In the price ex‐post setting, our analysis shows that in the post‐entry game, the entrant's optimism increases both firms’ prices and could benefit both firms. For the entry strategy, the high optimism of the entrant induces an incorrect entry decision; and our results reveal that the low optimism of the entrant benefits her entry. As for the pricing strategy, the incumbent will blockade the low optimistic entrant by keeping the normal price, impede the moderately optimistic entrant by lowering price, or accommodate the high optimistic entrant by setting the post‐entry price. Additionally, we consider the asymmetric information (about the entrant's type) setting, the price ex‐ante setting, and two optimistic firms setting. We find that the asymmetric information could not make the entrant benefit from her optimism, which is inconsistent with the symmetric information case; the entrant may miss the opportunity to enter the market in the price ex‐ante setting; and the incumbent's optimism makes him worse off.

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“…The market consolidation opens the door to strategic behaviors. This has led to a renewal in literature of research that uses game theory to liner shipping strategies (Wang et al 2014;Chen et al, 2016;Rau et al 2017;Liu and Wang 2019;Choi et al 2020). Another approach that is available to explore complex economic systems relies on the use of serious games and laboratory experiments, but has not yet been applied to better understand the dynamics of liner shipping competition.…”

Section: Introductionmentioning

confidence: 99%

Capacity management by global shipping alliances: findings from a game experiment

Cariou

Guillotreau

2021

Marit Econ Logist

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The present article uses game experiments to understand the dynamics of oligopolistic competition in liner shipping markets. We show how a limited number of carriers, interacting over time, acting independently or grouped into global shipping alliances, are able to effectively and jointly reduce excess capacity. A serious game (called TRALIN) has been designed to this end, mimicking the global liner shipping market where four to five global shipping alliances compete on a set of 12 routes, connecting four ports of call for a few sequential voyages. Carriers are initially subject to low profits due to overcapacity and have to anticipate competitor capacity decisions and vessel deployment simultaneously. Results from 18 experimental games with 4644 decisions were collected and statistically analysed to confirm the main tenets of oligopoly theory and to highlight the existence of a learning effect from successive interactions (rounds in games). Our results suggest that a 'coordinated' reduction in capacity is more likely to occur when the number of competitors is limited, but even more when excessive capacity is high, urging the need for cooperation; a learning effect amongst market participants is detected over time. Serious games are flexible tools for improving our understanding of competition, the organization of liner shipping networks, and the role played by global shipping alliances. This tool may help practitioners to understand how over-capacity is evolving within the competitive process, and what factors may influence it. Although voluntarily made simplistic for the purpose of experiments, our design allows one to focus on the main tenets of oligopoly theory as applied to shipping markets.

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Pricing with risk sensitive competing container shipping lines: Will risk seeking do more good than harm?

Cited by 55 publications

References 38 publications

Financing the capital-constrained online retailer with risk aversion: coordinating strategy analysis

Financing the capital-constrained online retailer with risk aversion: coordinating strategy analysis

Pricing and entry strategies for competitive firms with optimistic entrant

Capacity management by global shipping alliances: findings from a game experiment

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