Nash bargaining of transportation rates with flow imbalances. (8th April 2022)

• Record Type: Journal Article
• Authors: Singer, Marcos; Pardo, Ignacio; Sánchez, Ricardo J.
• Is Part Of: International journal of shipping and transport logistics. Volume 14:Number 3(2022)
• Page Start: 222
• Page End: 237
• Publication Date: 2022-04-08
• Subjects: transportation rates -- flow imbalances -- Nash bargaining -- maritime routes -- backhaul problem; Shipping -- Periodicals; Shipping -- Statistics; Logistics -- Periodicals; 387.5
• Languages: English
• ISSNs: 1756-6517

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.