Research team
Port capacity: pricing and investment under uncertainty. The development of a game-theoretical real options model in the maritime chain.
Abstract
The market shares, profits and net benefits of ports competing for the same fore- and hinterland can be significantly influenced by the decision when and how much to invest in additional capacity. The ultimate goal of this research is to evaluate and optimize investment and pricing decisions in ports under uncertainty resulting from economic, financial, environmental and technological variations. Port infrastructure projects are characterized as large-scaled, complex, irreversible and encompassing long lead times. Especially because demand is highly uncertain and cyclic and because ports are involved in an intertwined maritime supply chain inducing extra uncertainty, mismatching capacity can result in periods of overcapacity at high cost or scarcity resulting in waiting times. This influences the welfare of intertwined maritime actors. Private and social net benefits of port infrastructure projects are traditionally valuated using net present value analysis. Real options were introduced in literature as an alternative valuation method, allowing specifically for irreversibility and uncertainty. Inclusion of such a specific model with multiple actors in the cost benefit analysis allows going one step further and create a new, well-elaborated methodology to calculate and maximize benefits created in ports. This independent and fundamental research is required to calculate compensational transfers between the involved actors.Researcher(s)
- Promoter: Van de Voorde Eddy
- Co-promoter: Meersman Hilde
- Fellow: Balliauw Matteo
Research team(s)
Project type(s)
- Research Project
Port capacity: pricing and investment under uncertainty.
Abstract
The ultimate goal of this research is to optimize total social welfare through both pricing and investment decisions in ports under uncertainty resulting from economic, financial and technological variations. Port infrastructure projects are characterized as large-scaled, complex, irreversible and encompassing long lead times. Because demand is highly uncertain and cyclic, mismatching capacity can result in periods of overcapacity at high cost or scarcity resulting in waiting times. This influences total and individual welfare of intertwined maritime actors, both public and private. Welfare in port infrastructure is often optimized using cost benefit analysis. This is not very well suited to deal with high uncertainty. Real Options were introduced in the literature as an alternative financial valuation method. Extension of this framework and recent literature are the bases of this research to go one step further and create a new, well elaborated methodology to calculate and maximize total and individual welfare in ports. The impact on individual actors has to be calculated for two reasons. At first, in projects with many actors, agency problems prevent individual parties to pay for this research. Independent and fundamental research is thus required. Secondly, to prevent individual actors from blocking a project that is creating welfare in general but reducing private benefits, compensational transfers between the involved actors in the project can be calculated.Researcher(s)
- Promoter: Vanelslander Thierry
- Fellow: Balliauw Matteo
Research team(s)
Project type(s)
- Research Project