Pricing strategy of NVOCC considering paying freight in advance

Abstract

In recent years, with the increasingly fierce competition, non-vessel operating common carriers (NVOCCs) often pay freight for some small and medium-sized shippers in advance to win more customers. Therefore, NVOCC, whose main source of profit is freight difference, will adjust the freight rate to balance the risk-benefit relationship in the business process. Based on the above business process, this paper establishes the two-sided market pricing model, analyzing the pricing strategy of NVOCC. We find that there is a positive relationship between the capacity utilization and the optimal freight rate and profit of NVOCC; there is a threshold point for the incentive degree of the paid freight in advance by NVOCC to the small and medium-sized shippers: When the incentive degree is higher than the threshold point, the NVOCC obtains the maximum profit by paying freight for some small and medium-sized shippers in advance.