Capacity reservation for time-sensitive service providers : An application in seaport management

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review

2 Scopus Citations
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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)470-479
Journal / PublicationEuropean Journal of Operational Research
Volume245
Issue number2
Early online date28 Mar 2015
Publication statusPublished - 1 Sep 2015

Abstract

This paper analyzes a capacity management problem in which two service providers utilize a common facility to serve two separate markets with time-sensitive demands. The facility provider has a fixed capacity and all parties maximize demand rates. When the service providers share the facility, they play a frequency competition game with a unique Nash equilibrium. When the service providers have dedicated facilities, the facility provider leads two separate Stackelberg games. A centralized system with the first-best outcome is also examined. Based on closed-form solutions under all three scenarios, we find that facility capacity competition is a prerequisite condition for not pooling the service providers. Moreover, we establish the rankings of preferred strategies for all parties with respect to the ratio of the service providers' demand loss rates, which are proportional to the time sensitivity of demand and the potential market size. Interestingly a triple-agreement situation for the pooling strategy exists if the rates are close, and the facility provider permits a request for dedicated facilities only if the service provider has an overwhelming dominance at the demand loss rate. We connect these managerial insights with strategic seaport capacity management.

Research Area(s)

  • Capacity management, Frequency competition, Pooling, Seaport management, Time-sensitive demands