Concession Period Decision Models for Public Infrastructure Projects Based on Option Games

Concession period is an important decision-making variable for the investment and construction of public infrastructure projects. However, we currently have few scientific methods to exactly determine the concession period. This paper managed to seek out concession period decision models for public infrastructure with option game theory, studied the influence of minimum government income guarantee and government investment on concession period, and demonstrated those models in the formulas mentioned in the paper. The research results showed that the increase of minimum government income guarantee value would shorten the concession period, while the increase of income volatility, that is, the uncertainty, would lengthen the concession period. In terms of government investment, optimal concession period would lengthen to some extent with the increase of government investment ratio and the income and the decrease of its guarantee value. Yet, optimal concession period would shorten in case of extreme highness of the government investment ratio due to its high guarantee value. And the government would accordingly shorten the concession period in case of the unchanged government investment ratio with the increased income volatility and risks. Still, the paper put forward the argument that the government would apply various guarantee methods and implement flexible concession period in accordance with the specific circumstances of public infrastructure projects.

[1]  Pablo L. Durango-Cohen,et al.  A strategic model of public–private partnerships in transportation: Effect of taxes and cost structure on investment viability , 2012 .

[2]  Chuangxia Huang,et al.  Dynamics Analysis of a Class of Delayed Economic Model , 2013 .

[3]  Fenghua Wen,et al.  The Effects of Prior Outcomes on Risky Choice: Evidence from the Stock Market , 2014 .

[4]  C. Brown,et al.  Public private partnerships: Incentives, risk transfer and real options , 2007 .

[5]  Fenghua Wen,et al.  Investors’ Risk Preference Characteristics and Conditional Skewness , 2014 .

[6]  Fenghua Wen,et al.  Investors’ Risk Preference Characteristics Based on Different Reference Point , 2014 .

[7]  Ryuta Takashima,et al.  Government guarantees and risk sharing in public–private partnerships , 2010 .

[8]  Richard Ebil Ottoo,et al.  Valuation of Internal Growth Opportunities: The Case of a Biotechnology Company , 1998 .

[9]  Zhifang,et al.  CHARACTERISTICS OF INVESTORS' RISK PREFERENCE FOR STOCK MARKETS , 2014 .

[10]  Xiaoguang Yang,et al.  Skewness of return distribution and coefficient of risk premium , 2009, J. Syst. Sci. Complex..

[11]  Fenghua Wen,et al.  Robust CVaR-based portfolio optimization under a genal affine data perturbation uncertainty set , 2014 .

[12]  R. Marques,et al.  Flexible contracts to cope with uncertainty in public–private partnerships , 2013 .

[13]  Xiaohong Chen,et al.  Sufficient Conditions for Non-Bazilevič Functions , 2013 .

[14]  F. Medda.  A game theory approach for the allocation of risks in transport public private partnerships , 2007 .

[15]  S. T. Ng,et al.  A simulation model for optimizing the concession period of public-private partnerships schemes , 2007 .

[16]  Robert L. K. Tiong,et al.  The effect of concession period design on completion risk management of BOT projects , 2003 .

[17]  Liyin Shen,et al.  Using bargaining-game theory for negotiating concession period for BOT-type contract , 2007 .

[18]  Chuangxia Huang,et al.  An LMI Approach for Dynamics of Switched Cellular Neural Networks with Mixed Delays , 2013 .

[19]  Jian Liu,et al.  Utility indifference pricing of convertible bonds , 2014, Int. J. Inf. Technol. Decis. Mak..

[20]  Li yin Shen,et al.  Risk Concession Model for Build/Operate/Transfer Contract Projects , 2005 .