Chartering Negotiations for Energy Efficiency

Abstract

The fifth chapter introduces the reader to the quantitative part, which is devoted to answering the fundamental question how to design the energy efficiency sharing scheme mechanism and its connection to the chartering procedure. In this respect, game theory offers a wide range of models that can be adjusted to appropriately represent the incentive mixture for energy efficiency. Firstly, the principal -agent problem is utilized for determining the difference between the two players’ reservation prices (hire for time and freight for voyage charter ) as well as their information asymmetry related to energy efficiency. This forms the basis where the negotiations can begin. Secondly, the two players are given the opportunity to split the difference between them with alternating offers which resembles a bargaining game and results to the contracted price . Then, for the given vessel revenue performance, discounted cash flow analysis is performed to investigate whether the EEISS is profitable and the expense can be justified.