Centralization or decentralization: A comparative analysis of port regulation modes

• We use quantitative model to study the port centralization and decentralization mode.
• We emphasize the information asymmetric characteristic in port regulation mode.
• We use the generalized price in the port service demand function.
• The centralization mode is transferred as a bi-dimensional adverse selection problem.
• The decentralization mode is described as a Stackelberg game.

This paper studies the comparison of two kinds of port regulation modes – the centralization mode and the decentralization mode – using principal-agent theory and dynamic game theory. The optimal tariffs, port capacities and port efficiency levels under these two regulation modes are determined. The theoretical results are applied to the container terminals in Port of Shanghai in China. Sensitivity analysis and comparative studies show that the tariff, port efficiency level, port service demand and social welfare are higher under the decentralization mode, while the impact to port capacity and port operator’s profit with different port regulation modes is uncertain.