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Comparison of royalty methods for build–operate–transfer projects from a negotiation perspective

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  • Kang, Chao-Chung
  • Feng, Cheng-Min
  • Kuo, Chiu-Yen

Abstract

This study constructs a royalty negotiation model for the bi-level programming (BLP) problem and develops a heuristic algorithm for solving the BLP problem. Concession rate, learning effect, and the time value discount rate are integrated into the proposed algorithm to reflect an authentic negotiation process. A case study is employed to simulate the negotiation behavior of two parties and alternative royalty strategies are discussed. Analytical results indicate that the two parties acquire the best negotiation result during the fifth negotiation. The operational revenue-based royalty model is more preferred by governments, while concessionaires favor more the operational output-based royalty model.

Suggested Citation

  • Kang, Chao-Chung & Feng, Cheng-Min & Kuo, Chiu-Yen, 2012. "Comparison of royalty methods for build–operate–transfer projects from a negotiation perspective," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(4), pages 830-842.
    • Handle: RePEc:eee:transe:v:48:y:2012:i:4:p:830-842
    DOI: 10.1016/j.tre.2011.10.002
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    References listed on IDEAS

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    1. Yang, Hai & Meng, Qiang, 2000. "Highway pricing and capacity choice in a road network under a build-operate-transfer scheme," Transportation Research Part A: Policy and Practice, Elsevier, vol. 34(3), pages 207-222, April.
    2. Chao-Chung Kang & Cheng-Min Feng & Chiu-Yen Kuo, 2010. "Using bi-level programming to analyze the royalty for private--public partnership projects: the operational quantity-based model," Transportation Planning and Technology, Taylor & Francis Journals, vol. 33(3), pages 315-328, February.
    3. Liu, Yi-Hsin & Hart, Stephen M., 1994. "Characterizing an optimal solution to the linear bilevel programming problem," European Journal of Operational Research, Elsevier, vol. 73(1), pages 164-166, February.
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    Cited by:

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    2. Nur, Suardi & Burton, Bruce & Bergmann, Ariel, 2023. "Evidence on optimal risk allocation models for Indonesian geothermal projects under PPP contracts," Utilities Policy, Elsevier, vol. 81(C).
    3. Kang, Chao-Chung & Lee, Tsun-Siou & Huang, Szu-Chi, 2013. "Royalty bargaining in Public–Private Partnership projects: Insights from a theoretic three-stage game auction model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 59(C), pages 1-14.
    4. Lu, Zhaoyang & Meng, Qiang, 2017. "Analysis of optimal BOT highway capacity and economic toll adjustment provisions under traffic demand uncertainty," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 100(C), pages 17-37.
    5. 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.

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