Whether to invest in terminal efficiency: A perspective considering customer preference and capital constraint in competitive environment?

As ocean container transport becoming a critical element across the global markets, container terminals start to impose investment in terminal efficiency to enhance their competitiveness and capture greater market share. To analyze this strategy, we formulate a traditional game model in a two-terminals-one-port system, and derive the optimal investment level and pricing strategy of each participate while considering the customer efficiency preference and terminal's capital restrictions. Numerical simulation is applied in the terminals of Shanghai Yangshan Deep Water Port to explore the investment and pricing strategy. We find efficiency investment of a terminal is related to the market high efficiency preference. Terminal with higher basic efficiency is more inclined to invest to improve the efficiency level, while the rival terminal will set lower terminal charge to appeal the customers to avoid loss of customers and competitiveness. The study provides the feasibility for terminals' future development. [Display omitted] • We analyze in detail strategic decision about whether to invest and how much to invest in improving terminal efficiency. • The models considering consumer preference and capital constraint have been presented and analyzed strategically. • Relative to the capital constraint, terminal investment are more responsive to the consumer efficiency preference. [ABSTRACT FROM AUTHOR]