Abstract
Participation of private sector in infrastructural projects, highways in particular, has numerous advantages - freeing up the funds that can be used elsewhere being just one of them. The problems arising from awarding concessions can be, to a large extent, overcome by modifying the design of auction mechanism. The Demsetz auction stipulates the award of concessions for a fixed time period, the consequences of which are that the entire demand risk is borne by the concessionaire, and further inefficiencies, such as government guarantees. Modification of Demsetz auction results in LPVR (least present value of revenue) auction and creates a framework for a more intensive and efficient participation of private sector in infrastructural projects.
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