Optimal parameters in concession contracts between container terminal operators and investors

ABSTRACT

International investments in the port development become popular including the cases of Chinese companies who are continuously signing concession contracts with many other countries to promote the Belt and Road Initiative. One important issue in a concession contract between an investor and a container terminal operator is how the rental fee is calculated. This study discusses how the port investor optimises the parameters of fixed and variable rental fees for both the cases with a deterministic and an uncertain cargo demand. This study analyzes cases with an uncertain cargo demand in which terminal operators and the port investor may have the same or different degrees of uncertainty on cargo demand. The uncertainty in the cargo demand was found to decrease the revenue of the port investor and increase the profits of the terminal operators.

KEYWORDS:

• Belt and Road Initiative
• concession contract
• fixed and variable rental fee
• container terminal operator
• port investor

Acknowledgment

Authors thank anonymous reviewers and editors for their helpful comments and suggestions. This work was supported by a 2-Year Research Grant of Pusan National University. The authors also acknowledged the China Scholarship Council (CSC NO. 201608260014) for supporting Yanjie Zhou to study in the Department of Industrial Engineering, Pusan National University.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by Pusan National University.