Analysis of road capacity and franchise price decision delegation in toll road BOT project. (February 2021)

• Record Type: Journal Article
• Authors: Chen, Zhiyuan; Ye, Hanrui; Liu, Bingxi; Xue, Weili
• Is Part Of: Transportation research. Volume 146(2021)
• Publication Date: 2021-02
• Subjects: BOT project -- Toll road -- Optimal contract; Logistics -- Periodicals; Transportation -- Periodicals; 388.011
• DOI: 10.1016/j.tre.2020.102213
• Languages: English
• ISSNs: 1366-5545

Abstract

Highlights: Both the government and the private sector prefer to decide the franchise price. A longer franchise period is not always preferred by the private sector. The profit for the private sector is concave in the length of the franchise period. Abstract: This paper studies four Build-Operate-Transfer (BOT) models that the government is a leader, and the private sector is a follower. They decide road capacity and franchise price either jointly or sequentially. We find that both the government and the private sector prefer to decide the franchise price. Social welfare can be maximized if the government decides the price, and the private sector decides capacity. We further find that the private sector does not always prefer a more extended franchise period, and the profit of the private sector is concave in the length of the concession period. Nevertheless, the government prefers a more extended concession period because of the inefficient operation cost.