Abstract
To solve the transfer-operate-transfer (TOT) project contract model selection, contract structure optimization and the largest revenue of government and private partners, a revenue-sharing contract (RSC) structure equilibrium model of a TOT project is constructed based on the theory of share tenancy. According to the key parameters of RSC structure, the algebraic model is constructed by using the Lagrange multiplier method, and the geometric model is built by adopting the dynamic equilibrium method. The equilibrium conditions of the two models are obtained under the constraints of the maximization of income of both parties, and the equilibrium conditions of two models are verified as completely consistent. The result shows that 1) The RSC structure of the TOT project can achieve Pareto optimality and maximize revenue for both parties; 2) As the proportion of participants’ investment or risk sharing increases, their revenue-sharing ratio (RSR) will increase, and vice versa; 3) Regardless of transaction costs, the three contract models are equivalent; considering the transaction costs, the revenue share of the government in the RSC is greater than that in the equilibrium state. 4) Changing the assumptions, the equilibrium model can still provide ideas for revenue sharing contract structure and efficiency optimization.
Highlights
In recent years, the public-private partnerships (PPPs) model has been widely used in various industries [1] [2], providing an effective model for infrastructure and public services [3] [4]
It is necessary to establish an overall equilibrium model of revenue sharing contracts (RSCs) structure based on the principle of maximizing the opportunity cost of both parties and the rest life cycle of TOT projects to ease the adversarial relationship between government and the private partner, and to avoid franchise period becoming relatively independent of the rest life cycle of TOT projects, and to finding the equilibrium condition of the RSC structure to provides the basis for the choice of the contract model for participants, the optimization of the contract structure, and the design of the specific parameters of the contract terms
The balance of the TOT project RSC structure depends on its key parameters in coordination with each other, which are the investment of private partner, franchise period, franchise fee, income of private partner, and the RSR [3]
Summary
The public-private partnerships (PPPs) model has been widely used in various industries [1] [2], providing an effective model for infrastructure and public services [3] [4]. It is necessary to establish an overall equilibrium model of RSC structure based on the principle of maximizing the opportunity cost of both parties and the rest life cycle of TOT projects to ease the adversarial relationship between government and the private partner, and to avoid franchise period becoming relatively independent of the rest life cycle of TOT projects, and to finding the equilibrium condition of the RSC structure to provides the basis for the choice of the contract model for participants, the optimization of the contract structure, and the design of the specific parameters of the contract terms. The last part offers some conclusions and future research directions
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More From: American Journal of Industrial and Business Management
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