Price, capacity and concession period decisions of Pareto-efficient BOT contracts with demand uncertainty

In this paper, the authors study the impact of demand uncertainty on the build-operate-transfer (BOT) contract design by optimizing a bi-objective problem via three critical decisions: toll, capacity and concession period. They derive the optimums and identify the public and private sector’s economic incentives.They find that the optimal length of concession period and the service quality of the infrastructure depend on the two parties’ operational costs and negotiation powers. Under mild conditions, the authors prove that the government will build a larger capacity but charge less than the private sector. Furthermore, the efficiency of BOT contract is improved with demand uncertainty.

Language

  • English

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  • Accession Number: 01484017
  • Record Type: Publication
  • Files: TRIS
  • Created Date: May 16 2013 11:16AM