IDEAS home Printed from https://ideas.repec.org/a/inm/orserv/v10y2018i1p1-11.html
   My bibliography  Save this article

Fair Allocation in Financial Disputes Between Public–Private Partnership Stakeholders Using Game Theory

Author

Listed:
  • Alireza Sharafi

    (School of Industrial Engineering, College of Engineering, University of Tehran, 1439955961 Tehran, Iran)

  • Ata Allah Taleizadeh

    (School of Industrial Engineering, College of Engineering, University of Tehran, 1439955961 Tehran, Iran)

  • Mohsen Sadegh Amalnick

    (School of Industrial Engineering, College of Engineering, University of Tehran, 1439955961 Tehran, Iran)

Abstract

Long-term contracts along with their various internal and external variables lead to inevitable changes in the financial estimation of public–private partnership (PPP) projects. In these cases, and during renegotiations, the excess of benefit/cost should be shared among the key stakeholders, including the private contractor, government, and end users, in terms of contract extensions, annual subsidies, and tariff adjustments, respectively. However, while the allocation of excess befit/cost is an important factor in the successful execution of PPP projects, few methods have considered this issue. Moreover, these methods have rarely involved all three stakeholders and often have evaluated a limited number of possible solutions by qualitative techniques. To address the fair allocation of excess benefit/cost, this paper investigates some sharing mechanisms based on cooperative game concepts, including the core, the nucleolus, and the Shapley value. These mechanisms can improve the renegotiation regulations in PPP contracts and help decision makers manage renegotiations with better structure and supervision. The proposed allocation mechanisms are shown to be fair and practical approaches to managing the financial viability in PPP contracts.

Suggested Citation

  • Alireza Sharafi & Ata Allah Taleizadeh & Mohsen Sadegh Amalnick, 2018. "Fair Allocation in Financial Disputes Between Public–Private Partnership Stakeholders Using Game Theory," Service Science, INFORMS, vol. 10(1), pages 1-11, March.
    • Handle: RePEc:inm:orserv:v:10:y:2018:i:1:p:1-11
    DOI: 10.1287/serv.2017.0179
    as

    Download full text from publisher

    File URL: https://doi.org/10.1287/serv.2017.0179
    Download Restriction: no
    File URL: https://libkey.io/10.1287/serv.2017.0179?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Hart, Oliver D & Moore, John, 1988. "Incomplete Contracts and Renegotiation," Econometrica, Econometric Society, vol. 56(4), pages 755-785, July.
    2. Guasch, J. Luis & Laffont, Jean-Jacques & Straub, Stéphane, 2008. "Renegotiation of concession contracts in Latin America: Evidence from the water and transport sectors," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 421-442, March.
    3. Kenneth Button, 2016. "Public--private partnerships: a review of economic considerations with particular reference to transportation projects," Transportation Planning and Technology, Taylor & Francis Journals, vol. 39(2), pages 136-161, March.
    4. Domingues, Sérgio & Sarmento, Joaquim Miranda, 2016. "Critical renegotiation triggers of European transport concessions," Transport Policy, Elsevier, vol. 48(C), pages 82-91.
    5. Mathias Dewatripont, 1988. "Commitment Through Renegotiation-Proof Contracts with Third Parties," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 55(3), pages 377-390.
    6. Jingfeng Yuan & Alex Yajun Zeng & Miroslaw Skibniewski & Qiming Li, 2009. "Selection of performance objectives and key performance indicators in public-private partnership projects to achieve value for money," Construction Management and Economics, Taylor & Francis Journals, vol. 27(3), pages 253-270.
    7. Arshad Ali Javed & Patrick T.I. Lam & Albert P.C. Chan, 2014. "Change negotiation in public-private partnership projects through output specifications: an experimental approach based on game theory," Construction Management and Economics, Taylor & Francis Journals, vol. 32(4), pages 323-348, April.
    8. Frisk, M. & Göthe-Lundgren, M. & Jörnsten, K. & Rönnqvist, M., 2010. "Cost allocation in collaborative forest transportation," European Journal of Operational Research, Elsevier, vol. 205(2), pages 448-458, September.
    9. Robert Newcombe, 2003. "From client to project stakeholders: a stakeholder mapping approach," Construction Management and Economics, Taylor & Francis Journals, vol. 21(8), pages 841-848.
    10. José Luis Guasch & Daniel Benitez & Irene Portabales & Lincoln Flor, 2014. "The Renegotiation of PPP Contracts: An Overview of its Recent Evolution in Latin America," International Transport Forum Discussion Papers 2014/18, OECD Publishing.
    11. SCHMEIDLER, David, 1969. "The nucleolus of a characteristic function game," LIDAM Reprints CORE 44, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    12. S.C. Littlechild & G.F. Thompson, 1977. "Aircraft Landing Fees: A Game Theory Approach," Bell Journal of Economics, The RAND Corporation, vol. 8(1), pages 186-204, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jiang, Ke & Zhang, Jiaming & Zhang, Leilei & Wang, Die & Wang, Yusheng, 2023. "Sustainable cooperation in the watershed ecological compensation public-private partnership project: Lessons from China's Chishui river basin," Socio-Economic Planning Sciences, Elsevier, vol. 90(C).
    2. Jie Xiong & Shuming Wang & Tsan Sheng Ng, 2021. "Robust Bilevel Resource Recovery Planning," Production and Operations Management, Production and Operations Management Society, vol. 30(9), pages 2962-2992, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dimas de Castro e Silva Neto & Carlos Oliveira Cruz & Joaquim Miranda Sarmento, 2017. "Understanding the patterns of PPP renegotiations for infrastructure projects in Latin America," Competition and Regulation in Network Industries, , vol. 18(3-4), pages 271-296, September.
    2. M. Fiestras-Janeiro & Ignacio García-Jurado & Manuel Mosquera, 2011. "Cooperative games and cost allocation problems," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 19(1), pages 1-22, July.
    3. Ricardo Ferreira Reis & Joaquim Miranda Sarmento, 2019. "“Cutting costs to the bone”: the Portuguese experience in renegotiating public private partnerships highways during the financial crisis," Transportation, Springer, vol. 46(1), pages 285-302, February.
    4. Jiangang Shi & Kaifeng Duan & Guangdong Wu & Rui Zhang & Xiaowei Feng, 2020. "Comprehensive metrological and content analysis of the public–private partnerships (PPPs) research field: a new bibliometric journey," Scientometrics, Springer;Akadémiai Kiadó, vol. 124(3), pages 2145-2184, September.
    5. Mario Guajardo & Kurt Jörnsten & Mikael Rönnqvist, 2016. "Constructive and blocking power in collaborative transportation," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 38(1), pages 25-50, January.
    6. Fay, Marianne & Martimort, David & Straub, Stéphane, 2021. "Funding and financing infrastructure: The joint-use of public and private finance," Journal of Development Economics, Elsevier, vol. 150(C).
    7. Kosnik, Lea & Lange, Ian, 2011. "Contract renegotiation and rent re-distribution: Who gets raked over the coals?," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 155-165, September.
    8. 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.
    9. Gao, Evelyn & Sowlati, Taraneh & Akhtari, Shaghaygh, 2019. "Profit allocation in collaborative bioenergy and biofuel supply chains," Energy, Elsevier, vol. 188(C).
    10. Hojin Jung, 2016. "Renegotiation on incomplete procurement contracts," Applied Economics, Taylor & Francis Journals, vol. 48(23), pages 2125-2138, May.
    11. Lech Kruś, 2009. "Cost allocation in partition function form games," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 19(2), pages 39-49.
    12. R. Brânzei & E. Iñarra & S. Tijs & J. M. Zarzuelo, 2005. "Cooperation by Asymmetric Agents in a Joint Project," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(4), pages 623-640, October.
    13. Grigoriev, Alexander & Jung, Verena & Peeters - Rutten, Marianne & Vredeveld, Tjark, 2017. "On the Acceptance of Gain Sharing Methods in Supply Chain Collaboration," Research Memorandum 024, Maastricht University, Graduate School of Business and Economics (GSBE).
    14. Athias, Laure & Saussier, Stéphane, 2018. "Are public private partnerships that rigid? And why? Evidence from price provisions in French toll road concession contracts," Transportation Research Part A: Policy and Practice, Elsevier, vol. 111(C), pages 174-186.
    15. Kimms, A. & Kozeletskyi, I., 2016. "Core-based cost allocation in the cooperative traveling salesman problem," European Journal of Operational Research, Elsevier, vol. 248(3), pages 910-916.
    16. Long Li & Zhongfu Li & Lei Jiang & Guangdong Wu & Daojin Cheng, 2018. "Enhanced Cooperation among Stakeholders in PPP Mega-Infrastructure Projects: A China Study," Sustainability, MDPI, vol. 10(8), pages 1-16, August.
    17. Tijs, S.H. & Brânzei, R., 2004. "Cases in Cooperation and Cutting the Cake," Other publications TiSEM f9573808-10b5-4a9e-a835-2, Tilburg University, School of Economics and Management.
    18. Cano-Berlanga, Sebastián & Giménez-Gómez, José-Manuel & Vilella, Cori, 2017. "Enjoying cooperative games: The R package GameTheory," Applied Mathematics and Computation, Elsevier, vol. 305(C), pages 381-393.
    19. Martin Shubik, 2011. "The Present and Future of Game Theory," Levine's Working Paper Archive 786969000000000173, David K. Levine.
    20. Miroslav Prokić, 2023. "The applicability of Cooperative Game Theory in Rail Freight Corridors Framework," Shaping Post-COVID World – Challenges for Economic Theory and Policy, in: Aleksandra Praščević & Miomir Jakšić & Mihail Arandarenko & Dejan Trifunović & Milutin Ješić (ed.),Shaping Post-COVID World – Challenges for Economic Theory and Policy, chapter 14, pages 305-320, Faculty of Economics and Business, University of Belgrade.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:orserv:v:10:y:2018:i:1:p:1-11. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.