Decision-Making for Shipping Networks Based on Adaptive Cumulative Prospect Theory: A Case Study in Vietnam

This paper proposes an optimal method designed for use in a real-life situation to deal with port route choice decisions for evaluating and aggregating the daily net profit for liner shipping services to assist shipping lines in making optimal decisions under risk in the choice of the optimal route with the highest average daily profit for container liner shipping under the following un-certain combination factors: Freight rate, shipment demand, and fuel oil price. A cumulative prospect theory approach considers the decision-maker’s attitude to describe decision-making under uncertainty applicable for any number of consequences to calculate the daily net profit model for container vessels. The results are compared with benchmark methods such as expected utility theory. This paper includes an application of the proposed approach to Hai An container shipping lines in Vietnam in 2022. Furthermore, adaptive parameters are presented to improve a model’s performance when data distribution varies over time or across different contexts. The results show that the larger the adaptive parameter, the higher the daily profit, but the growth rate diminishes. The findings suggest that the Hai Phong-Ho Chi Minh route emerges as the safest with the least effect and the lowest variation in cumulative prospect value of daily profit. The Hai Phong (HP)-Tan Cang Cai Mep (TCIT)-Ho Chi Minh (HCM)-Hai Phong route is recommended as the most effective and economically favorable strategy for managers seeking the highest cumulative daily profit. This paper not only explains that the actual calculated results align with decision makers’ behavior, such as risk aversion, decision makers who prioritize stability are inclined to choose options or strategies that offer a higher level of certainty, even if it means foregoing higher profits, but also provides a practical and easy-to-apply method for choosing a shipping network.