Highlights • We investigate two shipping lines’ DT investment timing decisions under demand ambiguity. • If the shipping lines are symmetric, their DT investment game reaches a sequential equilibrium. • We discuss the government’s subsidy policies to regulate the DT investment timing. • If the government has complete information, the regulation rule exhibits a stepwise structure. • If the government has incomplete information, the shipping lines can obtain extra subsidies.

Abstract This paper establishes real option game models to investigate two competing shipping lines’ timing decisions on their respective dedicated terminal (DT) investments in the presence of demand ambiguity. In addition, we compare the shipping lines’ DT investment timing with the choice under the social optimum, and discuss the subsidy policies with which a government can regulate the shipping lines’ investment timing. The results indicate that (1) if the shipping lines are symmetric (i.e., have the same DT capacities, investment costs, and operation costs while having symmetric demands), their DT investment game could reach sequential investment equilibrium, where the leader makes a preemptive investment while the follower’s investment is delayed compared to the case without ambiguity; (2) when the government has complete information on the shipping lines’ ambiguity level, the regulation rule exhibits a stepwise structure where the social optimum (or the mixed timing between the social optimum and the shipping lines’ optimum, respectively) is implemented, if the social optimal timing is later (or earlier, respectively) than the shipping lines’ break-even timing; (3) when the government has incomplete information on the shipping lines’ ambiguity level, the stepwise structure still holds but the shipping lines can obtain extra subsidies due to their information advantages compared to the complete information case; and (4) compared to the complete information case, the incomplete information may promote (or delay, respectively) the regulated DT investment timing, if the increasing ambiguity has positive (or negative, respectively) effects on the shipping lines’ marginal option values.