Modelling port subsidy policies considering pricing decisions of feeder carriers

Feeder transportation is a key element of a port-oriented intermodal transportation system. In this paper, a pricing model is developed to investigate port subsidies to various players, i.e., mainline companies, feeder carriers, and shippers. The results show that port subsidies change the market equilibrium. Subsidies to mainline carriers increase the profit of the entire mainline-feeder liner shipping system. Subsidies to shippers decrease the equilibrium freight rates and stimulate the shipping demand, while subsidies to feeder carriers reduce operational costs and increase profitability. The results serve as policy recommendations to achieve various long-term goals in port development.