TY - GEN
T1 - A real option for attaining improved public-private partnership
AU - Chen, Hongyan
AU - Qin, Ruwen
PY - 2009
Y1 - 2009
N2 - This paper presents an option for improving publicprivate partnerships (PPP) using real options valuation and game theory. When a public entity grants a project to a private entity, the two become players in a game. The right offered by the public entity to the private entity to continue operating the project after the concession term expires is modeled as a European option. A traffic infrastructure build-operate-transfer (BOT) project demonstrates the proposed methodology. Results reveal that both the public and the private entities can benefit from this game-based option. On one hand, a BOT contract with the option may bring greater benefits to the private entity and motivate it to augment its capital investment. On the other hand, by selling the option and paying less maintenance costs, the public entity can reduce its risk in the face of unfavorable future conditions. Copyright
AB - This paper presents an option for improving publicprivate partnerships (PPP) using real options valuation and game theory. When a public entity grants a project to a private entity, the two become players in a game. The right offered by the public entity to the private entity to continue operating the project after the concession term expires is modeled as a European option. A traffic infrastructure build-operate-transfer (BOT) project demonstrates the proposed methodology. Results reveal that both the public and the private entities can benefit from this game-based option. On one hand, a BOT contract with the option may bring greater benefits to the private entity and motivate it to augment its capital investment. On the other hand, by selling the option and paying less maintenance costs, the public entity can reduce its risk in the face of unfavorable future conditions. Copyright
KW - Build-operate-transfer
KW - Game theory
KW - Public-private partnership
KW - Real options
KW - Risk management
UR - https://www.scopus.com/pages/publications/84879859900
M3 - Conference contribution
AN - SCOPUS:84879859900
SN - 9781617381058
T3 - 30th Annual National Conference of the American Society for Engineering Management 2009, ASEM 2009
SP - 582
EP - 587
BT - 30th Annual National Conference of the American Society for Engineering Management 2009, ASEM 2009
T2 - 30th Annual National Conference of the American Society for Engineering Management 2009, ASEM 2009
Y2 - 14 October 2009 through 17 October 2009
ER -