The application of uncertain three-player two-stage game to the competition among shipping alliances

The financial crisis in 2008 has had a negative impact across all economic sectors, especially the shipping industry. In order to strengthen market coverage and to avoid collapse, most of the top container lines have formed strategic alliances; however, the fierce competition among such powerful carrier groups and among group members is becoming a major concern. The purpose of the paper is to examine the competition from a pricing perspective and capacity expansion among the recently established alliances namely 2M+H, The Alliance and Ocean Alliance. An uncertain competition game model is built to decide the Nash equilibrium prices and expansion decisions of the three players. The paper suggests that the number of new ship orders should be reduced at this moment in time and alliances' strategic actions should be made to rebalance the shipping industry.