An Application of Modified Shapley Value to Ocean Shipping Strategic Alliances

Abstract

Over the last decade, liner shipping carriers have entered into operational relationships known as ocean shipping alliances. It allows carriers to aggregate cargoes and re-arrange vessels so that they are able to increase the revenue and reduce the cost. But it is also observed that some carriers would not join the shipping alliances for various reasons. This study aims to identify the effect when a new company tends to join an exiting alliance by the use of modified Shapley Value. First, some related works and the ocean shipping alliances are reviewed. Next, the Shapley Value is briefly introduced and a modified Shapley value, mentioned as "net value" is developed. Then, the problem of entry into an existing alliance is modeled as an n-player game. At last, a case study is presented and the authors reach the conclusions the relatively small carriers tend to be accepted by the alliances while large carriers would not.