Container hub port competition and cooperation in Northeast Asia

In response to the fierce competition in the market of container cargo transportation, strategic alliances between port operators are common in the maritime industry. This paper develops a two‐stage oligopoly model that comprises shippers, shipping lines and three ports (Shanghai, Ningbo and Busan Ports) located in Northeast Asia. We compare the optimal results of three strategies (independent, alliance and monopoly) and find that the alliance of Shanghai and Ningbo Ports is not only the best strategy for social welfare but also in the interest of coalition members. In addition, although the best payoff for ports is achieved under the monopoly strategy, social welfare is reduced. It means there is a misalignment between social and ports' incentives under monopoly strategy. Furthermore, the number of shipping lines will not affect the ports' preference of forming coalition.