A Novel Inland Barge Practice for Sustainable Freight in the Pearl River Delta: Pricing Strategies for Outsourcing Leftover Shipping Demands

The Pearl River Delta region suffers from congestion in the urban road network, noise, air pollution, and other “urban diseases”. Vigorously developing inland water transportation can greatly alleviate these “urban diseases”. However, it is difficult to take advantage of the inland waterway transportation cost advantages due to the Pearl River Delta’s short haul distance characteristics. In recent business practice, a novel, environment-friendly, and competitiveness-enhanced inland waterway transportation mode has emerged in the area, called the leftover-cargo mode in this paper. This mode is composed of first-tier (big companies) and second-tier (small companies) inland barge companies, which establish a cooperative relationship and jointly meet the needs of shippers and can lead to a modal shift from inland truck to inland waterway transportation. In real practice, the pricing methods of this novel mode still rely on experience. We propose four pricing game theory models based on channel leadership in order to investigate how decision-making impacts the pricing and income of the two-tier companies. We find that, if the market price ceiling is low, second-tier inland barge companies always benefit more than first-tier companies, which is very interesting and counter to the existing literature. These findings offer pricing insights into economically viable leftover-cargo cooperation and its role in supporting sustainable road-to-waterway freight modal shift in the Pearl River Delta.