Pricing and competition in a shipping market with waste shipments and empty container repositioning

• We build a monopoly and a duopoly model to study the carrier’s pricing strategy.
• We investigate how the profit of a carrier is affected by different parameters.
• Considering shipping waste always generates more profit in a monopolistic market.
• Carriers competing on severely imbalanced routes benefit from shipping waste.

In this paper, we study a shipping market with carriers providing services between two locations. Shipments are classified into two categories: goods and waste. Trade imbalance allows low-valued waste to be shipped at bargain rates. If imbalance persists, empty containers must be repositioned from a surplus location to a shortage location. Carriers decide prices, which will affect the demand. We build a monopoly and a duopoly model to find the optimal pricing strategy for carriers. We also analyze how the profit of a carrier is affected by price sensitivity, cost structure and competition intensity.