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Excess Revenue Allocation for Build-Operate-Transfer Highway Projects

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  • Jinbo Song
  • Lulu Jin
  • Wanli Dong

Abstract

Revenue uncertainty and volatility are problems in BOT highway projects because it is difficult to predict accurately future traffic volume. In high traffic demands, the absence of an excess revenue allocation mechanism leads to the private sector obtaining huge profits, and a high revenue risk to the government and the public. To solve this problem, the Black–Scholes (B–S) pricing method is used to determine the revenue cap, and a dynamic model is proposed to determine the excess revenue allocation proportion considering the consumer surplus rate and the revenue cap. Finally, the proposed model is illustrated by a numerical example.

Suggested Citation

  • Jinbo Song & Lulu Jin & Wanli Dong, 2016. "Excess Revenue Allocation for Build-Operate-Transfer Highway Projects," Journal of Transport Economics and Policy, University of Bath, vol. 50(3), pages 304-30-324.
    • Handle: RePEc:tpe:jtecpo:2016:50:3:304--324
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    File URL: https://www.jstor.org/stable/jtranseconpoli.50.3.0304
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