Selection of government supervision mode of PPP projects during the operation stage

Abstract

During the operation stage of public-private partnership (PPP) projects, investors may engage in opportunistic behaviour in pursuit of their own profits. In order to curb this kind of behaviour, this article analyses the selection of government supervision mode based on evolutionary game theory taking the perspective of government supervision. The results show that government supervision mode is closely related to the probability of identifying investors’ speculative behaviour through outcome-oriented supervision. When the probability of identifying such behaviour is relatively high, the equilibrium strategy of investors and governmental supervision institutions is (not to behave opportunistically, outcome-oriented supervision). In contrast, if the probability is relatively low, there is no set of evolutionarily stable strategies (ESS); rather, a periodic behavioural pattern is formed. In this scenario, the strategies ultimately chosen by both sides relate to initial states and the payoffs of the options. Furthermore, determinants and some recommendations for government supervision are proposed, providing a reference for efficient governance.