A Dynamic Game of Public Incentive Allocation Between Road Freight and Cabotage

We develop a game-theoretic framework to analyze public incentive allocation between road freight and coastal shipping (cabotage) in a competitive transport system. The interaction among government and transport operators is modeled as a sequential extensive-form game in which policy choices influence strategic investment decisions, generalized transport costs, and fiscal outcomes.The model captures how public incentives affect the strategic response of operators and allows equilibrium regimes to be computed under alternative policy scenarios. Sensitivity analysis over investment effectiveness parameters reveals regime-switching behavior and threshold effects in modal competition, highlighting conditions under which targeted incentives may induce equilibrium-consistent investment in cabotage.The proposed framework contributes to the literature on dynamic policy games by integrating incentive design, fiscal trade-offs, and equilibrium analysis in freight transport systems. Computational experiments illustrate how alternative incentive allocations can alter equilibrium outcomes and provide insights for policy design under strategic interaction.