Game Theory In Aviation And Port Industry

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Date
2015-02
Authors
TIAN SIANG, TAN
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Abstract
This research focuses on the applications of 3-player cooperative and noncooperative game theoretic models in the transportation and logistics industry. In particular, respective game theory models have been applied in the scenario analyses of the China’s aviation sector and the port industries of Malaysia and Singapore. China’s civil aviation industry has witnessed many challenges since its deregulation and economic reforms in 1979, which saw the beginning of a transformation from a fully state-owned machinery to a rent-seeking private sector. The major challenges of the deregulation are a lax market entry, sudden surge in new and foreign carriers, and intense price wars that resulted in major losses for the industry in 1998. A reform was sought. In 2002, mergers and consolidation efforts led to three dominant carriers: Air China Limited (AC), China Southern Airlines (CS), and China Eastern Airlines (CE). CS and CE completed about the same number of acquisitions, while AC has 8 completed acquisitions within the consolidation period other than the mergers mandated by the Civil Aviation Administration of China (CAAC). Using a 3-player non-cooperative perfect information Cournot game, the strategic efficiency of the CAAC’s decisions to consolidate the industry based on operating expense, passenger revenue, and profitability are investigated. All three airlines are better off with acquisition. The second section of this thesis analyses the ocean freight traffic demand for the Far East-Europe route among three main transshipment ports located in Malaysia and Singapore: Port of Singapore (PSA), Port Klang (PKL), and Port of Tanjung Pelepas (PTP). This thesis provides a scenario analysis to the 3-way interaction through a game theoretic model. The results suggest that a strategic alliance between PSA and PTP generates greater profitability to the current hub-andspoke network, while PKL should not commit to any cooperative strategy with either PSA or PTP.
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Game Theory In Aviation , And Port Industry
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