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Royalty bargaining in Public–Private Partnership projects: Insights from a theoretic three-stage game auction model

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  • Kang, Chao-Chung
  • Lee, Tsun-Siou
  • Huang, Szu-Chi

Abstract

This study presents a transformed first-price sealed-bid auction with independent private values to determine the equilibrium royalties and subsidies in Public–Private Partnerships. The proposed model implies that royalties and subsidies are influenced by the true values bidders assign to a target project and the payoff received by a government from taking up its outside options instead of its bargaining power. In addition, such payoff is vulnerable to collusion. A real case is also detailed to show how reported signals, royalties and subsidies are determined in different cases.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:transe:v:59:y:2013:i:c:p:1-14
    DOI: 10.1016/j.tre.2013.08.001
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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. Wang, Hua & Zhang, Xiaoning, 2016. "Joint implementation of tradable credit and road pricing in public-private partnership networks considering mixed equilibrium behaviors," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 94(C), pages 158-170.
    4. Jamal Ouenniche & Aristotelis Boukouras & Mohammad Rajabi, 2016. "An Ordinal Game Theory Approach to the Analysis and Selection of Partners in Public–Private Partnership Projects," Journal of Optimization Theory and Applications, Springer, vol. 169(1), pages 314-343, April.
    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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