Analyzing the effect of government subsidy on shippers' mode switching behavior in the Belt and Road strategic context

The Chinese government is offering subsidies to promote the recently developed China-Europe rail freight corridor under its Belt and Road Initiative (BRI). Despite significant subsidies, the rail mode (China Railway Express) continues to struggle with low load factor. Accordingly, a competition model (rail vs. maritime) grounded on game-theoretic technique is proposed to analyze the effect of the government subsidy on shippers' mode switching (from maritime to rail) behavior. Analytical results based on a case of China-Germany rail freight transportation describe shippers' mode switching patterns in response to a mode subsidy and suggest a subsidy scheme for the government.