The LNG (Liquefied Natural Gas) trade is one of the most promising sectors in energy shipping. An important characteristic of the LNG shipping market is its oligopolistic structure. The market actors make their decisions independently, yet knowing that these decisions are likely to influence the strategic positioning of the other players. This context is appropriate for the adoption of a (non-cooperative) game theoretic analysis framework to support decision-making. Two topics of strategic decision-making in LNG shipping are investigated in this paper, namely Early Commitment and Entry Deterrence. Early Commitment has to do with the rationale that may justify an early strategic investment commitment (it may also be encountered as "pre-commitment") . In an LNG shipping market such a pre-commitment could be an order of (uncommitted) LNG vessels to be launched in the market in a future point in time. Entry Deterrence is a strategic interaction between a monopolist LNG shipowner in a specific market (the incumbent) and a potential entrant or entrants in that market. The entrants offer identical or close substitute products (services), i.e. the LNG cargoes shipping service. If they enter the market, then the incumbent's profits are reduced, so the incumbent - monopolist tries to prevent other firms from entering the market. First, a traditional approach to such a strategic interaction is discussed and it is explained why it is unsatisfactory. Then, it is presented how game theory provides a more sophisticated treatment of the subject, and the previously developed early commitment concepts are also utilised for this purpose.
|Number of pages||11|
|Publication status||Published - 2008|
|Event||International Symposium on Ship Operations, Management and Economics (SNAME Greek Section): SNAME Greek Section - Athens, Greece|
Duration: 17 Sep 2008 → 18 Sep 2008
Conference number: 2
|Conference||International Symposium on Ship Operations, Management and Economics (SNAME Greek Section)|
|Period||17/09/2008 → 18/09/2008|
- LNG shipping
- Strategic decision making
- Game theory
- Early commitment
- Entry deterrence
Gkonis, K. G., & Psaraftis, H. N. (2008). Early Commitment and Entry Deterrence in an LNG shipping market. Paper presented at International Symposium on Ship Operations, Management and Economics (SNAME Greek Section), Athens, Greece.