Title: Nash bargaining of transportation rates with flow imbalances

Authors: Marcos Singer; Ignacio Pardo; Ricardo J. Sánchez

Addresses: Escuela de Administración, Pontificia Universidad Católica de Chile, Vicuña Mackenna 4860, Macul, Santiago, Chile ' Bethia S.A., Isidora Goyenechea 2800, 50th Floor, Las Condes, Chile ' United Nations Economic Commission for Latin America and the Caribbean (UN-ECLAC), Casilla 179-D, Santiago, Chile

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.

Keywords: transportation rates; flow imbalances; Nash bargaining; maritime routes; backhaul problem.

DOI: 10.1504/IJSTL.2022.122412

International Journal of Shipping and Transport Logistics, 2022 Vol.14 No.3, pp.222 - 237

Accepted: 22 Feb 2020
Published online: 25 Apr 2022 *

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