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The Joy of Flying: Efficient Airport PPP contracts

Author

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  • Eduardo Engel
  • Ronald Fischer
  • Alexander Galetovic

Abstract

We examine optimal contracts for PPPs which receive revenue from user fees as well as ancillary commercial revenue, for example from commercial space in the case of airports. We assume that demand for the project is exogenous. Ancillary revenue is observable and requires effort by the concessionaire. If this additional revenue is proportional to demand for the underlying PPP project, we show that the optimal contract of the concessionaire eliminates all exogenous risk but retains a fraction of the endogenous risk. The contract can be implemented via a standard Present-Value-of-Revenue (PVR) auction (Engel et al., 2001). JEL classiffications: H440, R420, L51 Key words: Creation-Date: 2015

Suggested Citation

  • Eduardo Engel & Ronald Fischer & Alexander Galetovic, "undated". "The Joy of Flying: Efficient Airport PPP contracts," Documentos de Trabajo 322, Centro de Economía Aplicada, Universidad de Chile.
    • Handle: RePEc:edj:ceauch:322
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    References listed on IDEAS

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    Cited by:

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    2. Achard, Paola Olimpia & Di Berardino, Antonina, 2018. "Public Private Partnerships: Strategic Assets and Managerial Models," 29th European Regional ITS Conference, Trento 2018 184925, International Telecommunications Society (ITS).
    3. Zhao, Jianfeng & Liu, Henry J. & Love, Peter E.D. & Greenwood, David J. & Sing, Michael C.P., 2022. "Public-private partnerships: A dynamic discrete choice model for road projects," Socio-Economic Planning Sciences, Elsevier, vol. 82(PA).
    4. Shi, Shasha & Yin, Yafeng & An, Qingxian & Chen, Ke, 2021. "Optimal build-operate-transfer road contracts under information asymmetry and uncertainty," Transportation Research Part B: Methodological, Elsevier, vol. 152(C), pages 65-86.
    5. Chih-Yao Huang & Ren-Jye Dzeng, 2019. "Evaluating Ancillary Business Scale for PPP-BOT Projects: A Social Housing BOT Case in Taiwan," Sustainability, MDPI, vol. 11(5), pages 1-17, March.

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    More about this item

    Keywords

    creation-date: 2015;

    JEL classification:

    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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