Competitive Strategies In Bilateral Oligopoly -The Case Of Coastal Coal Transport Market In China

Compared with the international dry bulk shipping market, China coastal coal transport market is a relatively closed market with both supply and demand showing the characteristics of oligopoly. In a bilateral oligopoly market, price is often decided by negotiating between oligarchs. Oligarch with strong bargaining power tends to benefit more from the negotiation, that’s why all the oligarchs have motivation to enhance their bargaining power. In order to study the pricing mechanism in the coastal coal transport market, dynamic game model with incomplete information and sequential game model are built to study the effect of information acquisition ability, outside option, horizontal alliance and vertical integration in the bargaining process. To make the model more practical, numerical analysis considering different market condition is conducted.The following conclusions are drawn. Firstly, game players’market share, tolerance to stockout, information acquisition ability, patience and outside option will affect the bargaining result. Players with larger market share will benefit more from the bargaining than players with smaller market share. Bargaining power could be improved by enhancing the players’tolerance to stockout and information acquisition ability. Players’patience will change with the market condition, in a buyer’s market, the patience of suppliers will fade rapidly, vice versa in a seller’s market. Game players with wide outside option can benefit more from the bargaining too. Secondly, horizontal alliance can strengthen the alliance members’ bargaining power, player with smaller market share can benefit more from the alliance. Thirdly, as one popular form of vertical integration, owner-controlled fleet has its rationality only with the premise that owners are equipped with high fleet management ability. Comparing with other game strategies, vertical integration is more favorable with lower risk and higher reliability. Fourthly, Cooperation between shippers and carriers is a good solution to reduce the social welfare loss in the coastal coal transport market and rebuilt market order.