A game theoretic “mode-choice” model for freight transportation

Abstract.

This paper uses simple game theory to analyze a situation where two agents compete in the transport market. The modeling frame is that of a mode choice model, where the two mode options are boat or car transportation. The basic findings are that non pareto optimal (car, car) equilibrium outcomes, may occur in a surprisingly large amount of cases. Additionally, the possible different Nash equilibria outcomes are fairly large leading to a situation which may be hard both to model and predict for regulatory authorities. Finally, in certain situations, subsidizing boat transportation may not lead to increased use of boat as transport modal choice. In final sections of the paper, the case of demand uncertainty is examined. The basic findings here, is that unique Nash equilibria where both agents choose car emerge as a consequence of added uncertainty.