Optimization of the Pricing Strategies between Container Terminals under Deregulation

According to the dual-track system implemented on port tariffs in past years, the vast majority of state-owned container terminals adopt the standard rates specified by China’s Ministry of Transport, while the container terminals of joint ventures are permitted to charge their stevedoring rate with a 20% float ratio up and down. The latest port reform was to improve the port tariff formation mechanism by speeding up the implementation of detailed list and public notice on port pricing. This paper analyses the optimization of the pricing strategies between container terminals under deregulation. Based on a two-stage noncooperative game theoretical model, the Nash equilibria of pricing strategy profiles between container terminals of one port under deregulation are derived. Although the price-matching strategy may be employed by the foreign-owned container terminal, which usually resulting in a total social welfare loss, the price-matching pricing strategy not being adopted by the state-owned container terminal will avert tacit collusion. Numerical simulation is applied to the case of Shenzhen Port.

Port reform – key aspect of globalization

Globalization and increased free trade between continents have led to the need to adapt port management to changes and opportunities that occurred. Ports under public administration have had to identify strategies to deal with more aggressive regional or international competition. The opinion of governments of developing countries about improving port performance is more involvement of the private sector. Therefore, countries have understood the need to change over ports administration system from the "public interest" into "public/private interest" category. This paper attempts to highlight the importance of structural reform in the ports due to national markets open up to international trade and the need to integrate the port into the local or regional logistic chain.