Strategic network design in an oligopolistic market for maritime container transport


We consider an essential model in which two symmetric and profit-maximizing firms compete in a shipping industry characterized by a given map of ports, technology, and demand functions of container flows. The model is designed as a 4-stage information game: in the first stage, firms simultaneously invest in their supply capacity, while the second stage deals with the design of firms’ transport network. Network structure is addressed in the 3rd stage, while the ultimate stage deals with demand allocation based on the cost of links between ports. The game is solved by backward induction.