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Sharing Risk Through Concession Contracts

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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

  • Pasquale Lucio Scandizzo & Marco Ventura, 2010. "Sharing Risk Through Concession Contracts," CEIS Research Paper 166, Tor Vergata University, CEIS, revised 28 May 2010.
  • Handle: RePEc:rtv:ceisrp:166
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    1. Eric Maskin, 2004. "The Unity of Auction Theory: Paul Milgrom's Masterclass," Economics Working Papers 0044, Institute for Advanced Study, School of Social Science.
    2. Scandizzo, Pasquale L. & Ventura, Marco, 0. "Bids for the UMTS system: An empirical evaluation of the Italian case," Telecommunications Policy, Elsevier, vol. 30(10-11), pages 533-551, November.
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    7. Thomas Nagel & Margarethe Rammerstorfer, 2009. "Modeling investment behavior under price cap regulation," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 17(2), pages 111-129, June.
    8. Eduardo S. Schwartz, 2004. "Patents and R&D as Real Options," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 33(1), pages 23-54, February.
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    1. repec:eee:ejores:v:270:y:2018:i:1:p:1-24 is not listed on IDEAS
    2. repec:eee:ejores:v:267:y:2018:i:1:p:368-380 is not listed on IDEAS
    3. 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.
    4. repec:gam:jsusta:v:10:y:2018:i:4:p:1178-:d:141015 is not listed on IDEAS

    More about this item

    Keywords

    (S) uncertainty modelling; real option; (B) transportation; (P) 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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