Considering the actors (i.e., two shipping lines and the port authorities) and the predetermined cost functions described below (i.e., transportation costs and port fees), and determine the equilibrium outcome (price, quantity, and profit) of the game. Let qi for i = 1 and 2 denote the number of containers transported by shipping line i. Assume a standard inverse demand function for a container of the form P = 20 000 − (q1 + q2) , and a total transportation cost function, excluding fixed costs, of the form TC = 200qi + (dt/2)*qi2 for i = 1,2, and t=low, high, representing low and high diseconomies of scale, i.e. dlow < dhigh. When both shipping lines choose the port of Gothenburg, which is characterized by low diseconomies of scale, each vessel incurs a lump sum of €1200 in port fees. In the case when both vessels choose the port of Helsingborg, which is characterized by high diseconomies of scale, each vessel incurs €1000 in port fees. Lastly, when the shipping lines choose different port authorities, each vessel incurs €1500 in fees. Consider that competition takes a Cournot form and determines the equilibrium of this one-shot simultaneous game.
Considering the actors (i.e., two shipping lines and the port authorities) and the predetermined cost functions described below (i.e., transportation costs and port fees), and determine the
P = 20 000 − (q1 + q2)
, and a total transportation cost function, excluding fixed costs, of the form
TC = 200qi + (dt/2)*qi2
for i = 1,2, and t=low, high, representing low and high diseconomies of scale, i.e. dlow < dhigh. When both shipping lines choose the port of Gothenburg, which is characterized by low diseconomies of scale, each vessel incurs a lump sum of €1200 in port fees. In the case when both vessels choose the port of Helsingborg, which is characterized by high diseconomies of scale, each vessel incurs €1000 in port fees. Lastly, when the shipping lines choose different port authorities, each vessel incurs €1500 in fees. Consider that competition takes a Cournot form and determines the equilibrium of this one-shot simultaneous game.
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