Nash bargaining of transportation rates with flow imbalances
by Marcos Singer; Ignacio Pardo; Ricardo J. Sánchez
International Journal of Shipping and Transport Logistics (IJSTL), Vol. 14, No. 3, 2022

Abstract: Consider two points, A and B, which trade products with a flow imbalance. We postulate that shippers at A face an implicit negotiation with the shippers at B regarding who must bear the cost of a vehicle travelling back and forth. Following the Nash bargaining model, we deduce that the ratio (freight rate A-to-B)/(freight rate B-to-A) changes linearly with the ratio (flow B-to-A)/(flow A-to-B). We validate our model with evidence from previous publications and with quarterly data from the Transatlantic, Transpacific and Europe-Asia maritime routes from 2003 to 2012.

Online publication date: Mon, 25-Apr-2022

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