Price, Capacity and Concession Period Decisions of Pareto-Efficient BOT Contracts with Demand Uncertainty.
Transportation Research Part E, 53 (July), 2013
35 Pages Posted: 28 Jul 2014
Date Written: February 18, 2013
In this paper, we 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. We derive the optimums and identify the public and private sector’s economic incentives. We 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, we 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.
Keywords: BOT contract, Demand uncertainty, Infrastructure privatization, Economic efficiency
Suggested Citation: Suggested Citation