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Fair Allocation in Financial Disputes Between Public–Private Partnership Stakeholders Using Game Theory

Author

Listed:
  • Alireza Sharafi

    (School of Industrial Engineering, College of Engineering, University of Tehran, 1439955961 Tehran, Iran)

  • Ata Allah Taleizadeh

    (School of Industrial Engineering, College of Engineering, University of Tehran, 1439955961 Tehran, Iran)

  • Mohsen Sadegh Amalnick

    (School of Industrial Engineering, College of Engineering, University of Tehran, 1439955961 Tehran, Iran)

Abstract

Long-term contracts along with their various internal and external variables lead to inevitable changes in the financial estimation of public–private partnership (PPP) projects. In these cases, and during renegotiations, the excess of benefit/cost should be shared among the key stakeholders, including the private contractor, government, and end users, in terms of contract extensions, annual subsidies, and tariff adjustments, respectively. However, while the allocation of excess befit/cost is an important factor in the successful execution of PPP projects, few methods have considered this issue. Moreover, these methods have rarely involved all three stakeholders and often have evaluated a limited number of possible solutions by qualitative techniques. To address the fair allocation of excess benefit/cost, this paper investigates some sharing mechanisms based on cooperative game concepts, including the core, the nucleolus, and the Shapley value. These mechanisms can improve the renegotiation regulations in PPP contracts and help decision makers manage renegotiations with better structure and supervision. The proposed allocation mechanisms are shown to be fair and practical approaches to managing the financial viability in PPP contracts.

Suggested Citation

  • Alireza Sharafi & Ata Allah Taleizadeh & Mohsen Sadegh Amalnick, 2018. "Fair Allocation in Financial Disputes Between Public–Private Partnership Stakeholders Using Game Theory," Service Science, INFORMS, vol. 10(1), pages 1-11, March.
    • Handle: RePEc:inm:orserv:v:10:y:2018:i:1:p:1-11
    DOI: 10.1287/serv.2017.0179
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    References listed on IDEAS

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