Should we concession 1 large container terminal of 2 smaller ones? A game theoretical approach with application to Valparaiso port
Institute for Transport en Maritime Management (ITMMA)
Asian Logistics Round Table 2012 Conference (ALRT 2012), University of British Columbia (UBC), Vancouver, 14-15 June 2012
University of Antwerp
During the pre-bidding phase of a terminal awarding procedure, landlord port authorities are sometimes confronted with the strategic decision whether to split an available port site into two or more sections to be concessioned separately to different terminal operators. A recent case includes the port of Brisbane in Australia. The port authority of Valparaiso in Chile is now facing a similar challenge. The port authority of Valparaiso concessioned terminal 1 to a private operator and is considering whether it should concession the second site to the same terminal operator or, alternatively, opt for a competitive bidding procedure to attract another terminal operator, thereby initiating intra-port competition. The port is already facing inter-port competition from neighbouring port San Antonio which handles about the same container volume as port of Valparaiso. In this paper, a game theoretical model is developed in order to shed light on the best option for the port authority of Valparaiso. For this purpose, a non-cooperative two-stage game is developed that models intra-port in and inter-port competition between the port of Valparaiso and San Antonio. In the first stage, the port authority of Valparaiso decides on the way it is going to subdivide its respective port infrastructure. In the second stage, competition between the terminals of the two ports is modelled as a Bertrand game. The game is solved backwards. This paper builds further on earlier work of the authors with respect to the application of game theory to inter-port and intra-port competition by providing a real-life application to Chilean ports.