A Real Option for Attaining Improved Public-private Partnership
Abstract
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© (2009) by the American Society for Engineering Management.
Recommended Citation
H. Chen and R. Qin, "A Real Option for Attaining Improved Public-private Partnership," 30th Annual National Conference of the American Society for Engineering Management 2009, ASEM 2009, pp. 582 - 587, American Society of Engineering Management, Dec 2009.
Department(s)
Engineering Management and Systems Engineering
Keywords and Phrases
Build-operate-transfer; Game theory; Public-private partnership; Real options; Risk management
International Standard Book Number (ISBN)
978-161738105-8
Document Type
Article - Conference proceedings
Document Version
Citation
File Type
text
Language(s)
English
Rights
© 2024 American Society for Engineering Management, All rights reserved.
Publication Date
01 Dec 2009
