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Sharing risk through concession contracts

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  • Scandizzo, Pasquale L.
  • Ventura, Marco

Abstract

In this paper we model concession contracts between a public and a private party, under dynamic uncertainty arising both from the volatility of the cash flow generated by the project and by the strategic behaviour of the two parties. Under these conditions we derive three notions of equilibrium price and apply the model to a case study for one of the most important concession contracts in Italy.

Suggested Citation

  • Scandizzo, Pasquale L. & Ventura, Marco, 2010. "Sharing risk through concession contracts," European Journal of Operational Research, Elsevier, vol. 207(1), pages 363-370, November.
    • Handle: RePEc:eee:ejores:v:207:y:2010:i:1:p:363-370
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    2. Yanhua Du & Jun Fang & Yongjian Ke & Simon P Philbin & Jingxiao Zhang, 2019. "Developing a Revenue Sharing Method for an Operational Transfer-Operate-Transfer Project," Sustainability, MDPI, vol. 11(22), pages 1-19, November.
    3. Silaghi, Florina & Sarkar, Sudipto, 2021. "Agency problems in public-private partnerships investment projects," European Journal of Operational Research, Elsevier, vol. 290(3), pages 1174-1191.
    4. Lukas, Elmar & Thiergart, Sascha, 2019. "The interaction of debt financing, cash grants and the optimal investment policy under uncertainty," European Journal of Operational Research, Elsevier, vol. 276(1), pages 284-299.
    5. Marco Buso & Cesare Dosi & Michele Moretto, 2018. "Termination Fees and Contract Design in Public-Private Partnerships," Working Papers 2018.32, Fondazione Eni Enrico Mattei.
    6. Pasquale L. Scandizzo & Marco Ventura, 2015. "Organized crime, extortion and entrepreneurship under uncertainty," European Journal of Law and Economics, Springer, vol. 39(1), pages 119-144, February.
    7. He Yiming & Luo Biliang & Zou Baoling, 2018. "Do Heterogeneous Agricultural Factors Affect Farmland Contractual Choice?—Evidence from China," Man and the Economy, De Gruyter, vol. 5(1), pages 1-12, June.
    8. Chin-Yi Fred Fang, 2020. "Perspective of Local Government on the Performance Assessment of District Sports and Leisure Centers," Sustainability, MDPI, vol. 12(21), pages 1-21, October.
    9. Trigeorgis, Lenos & Tsekrekos, Andrianos E., 2018. "Real Options in Operations Research: A Review," European Journal of Operational Research, Elsevier, vol. 270(1), pages 1-24.
    10. Jin, Hongyu & Liu, Shijing & Sun, Jide & Liu, Chunlu, 2021. "Determining concession periods and minimum revenue guarantees in public-private-partnership agreements," European Journal of Operational Research, Elsevier, vol. 291(2), pages 512-524.
    11. Di Corato, Luca & Dosi, Cesare & Moretto, Michele, 2018. "Multidimensional auctions for long-term procurement contracts with early-exit options: The case of conservation contracts," European Journal of Operational Research, Elsevier, vol. 267(1), pages 368-380.
    12. Cerqueti, Roy & Ventura, Marco, 2020. "Optimal concession contracts for oil exploitation," Energy Policy, Elsevier, vol. 147(C).
    13. Feng, Zhuo & Song, Jinbo & Yang, Xiaoxing & Guo, Ran, 2023. "Contractual flexibility, firm effort, and subsidy design: A comparison of PPP project contracts," European Journal of Operational Research, Elsevier, vol. 307(1), pages 484-496.
    14. Wang, Grace W.Y. & Pallis, Athanasios A., 2014. "Incentive approaches to overcome moral hazard in port concession agreements," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 67(C), pages 162-174.
    15. Ru Liang & Changzhi Wu & Zhaohan Sheng & Xiangyu Wang, 2018. "Multi-Criterion Two-Sided Matching of Public–Private Partnership Infrastructure Projects: Criteria and Methods," Sustainability, MDPI, vol. 10(4), pages 1-22, April.

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    More about this item

    Keywords

    Uncertainty modelling Real option Transportation Risk analysis Concession contract;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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