Economically-efficient port expansion strategies: An optimal control approach

This paper proposes an analytical model with a control approach to obtain an optimal port expansion strategy by balancing investment costs for the port and congestion costs for its users. Starting point is the optimality condition that marginal investment costs should balance marginal benefits. Particularly the scale effect in investment costs is considered; the consequence that the investment will be made in different stages is included in the solution. By relaxing some assumptions in the model, a numerical optimization algorithm is proposed which is applied to show how the approach can be used to deal with a practical expansion problem.

Research highlights► Optimal Control contributes to the simultaneous solution of timing and size. ► Timing and size are highly sensitive for changing values of scale factors. ► A changing value for annual demand growth does not affect the expansion size. ► Inter-port competition and widening the scope of the benefits are useful additions.