Andrés Pereyra () (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
Abstract
In road concessions – where the effort of the concessionaire cannot increase the demand for infrastructure – it is better not to allocate risk of demand into the concessionaire. Engel et. al. (1997) introduced variable term concessions in order to mitigate risk of demand allocated to the concessionaire. In this paper we introduce variable investment concessions to achieve the same target. We show that both mechanisms are equivalent in their objective of mitigate risk of demand, although the mechanism proposed is more difficult to be implemented. We compare the application of both mechanism in the case of Uruguay.
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