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The effects of service level on BOT transport project contract

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  • Zhang, Yiwen
  • Feng, Zhuo
  • Zhang, Shuibo
  • Song, Jinbo

Abstract

For many BOT transport projects, the government imposes service level requirement on the private firm so that project capacity and stochastic demand can be better matched. We define service level as the probability of project capacity satisfying uncertain demand. The results suggest that the presence of service level requirement improves both user fee and project capacity, and also improves consumer surplus while decreases firm profit. We have made two extensions to investigate the government’s optimal service level, and to compare service level requirement with capacity regulation and price cap regulation. Some managerial insights offered by model results are discussed.

Suggested Citation

  • Zhang, Yiwen & Feng, Zhuo & Zhang, Shuibo & Song, Jinbo, 2018. "The effects of service level on BOT transport project contract," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 118(C), pages 184-206.
    • Handle: RePEc:eee:transe:v:118:y:2018:i:c:p:184-206
    DOI: 10.1016/j.tre.2018.07.013
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    Cited by:

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    7. Shi, Shasha & An, Qingxian & Chen, Ke, 2020. "Optimal choice of capacity, toll, and subsidy for build-operate-transfer roads with a paid minimum traffic guarantee," Transportation Research Part A: Policy and Practice, Elsevier, vol. 139(C), pages 228-254.
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