Modeling ceiling price for build-operate-transfer road projects in developing countries

Nguyen Hoang-Tung, Do Viet Hung, Hironori Kato and Phan Le Binh

Economics of Transportation, 2021, vol. 28, issue C

Abstract: This study examines a ceiling price for build-operate-transfer (BOT) road projects in the context of developing countries. Although ceiling price is one of the most significant elements in BOT policy given that it has a focal-point effect, it has been rarely examined in prior studies. Subsequently, the study formulates a model of ceiling price under the framework of simple two-route network by integrating the nature of travelers' mode choice with the interaction between stakeholders through the Nash equilibrium as well as a risk-mitigation approach in the ceiling price decision-making process. The proposed model has unique characteristics that allow the government to protect social welfare while still providing opportunities for private investors to achieve their optimal toll rates. It also provides room to the government for negotiating with private investors while taking into account travelers' benefits and risk identification. The model is applied to a case study in Hanoi, Vietnam; and successfully showed its applicability with empirical evidences. The proposed method highlights planning aspects rather than road users’ aspect, which is expected to contribute to a project preparation stage in BOT projects.

Keywords: Ceiling price; Price control; Build operate transfer; Road project; Developing country (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecotra:v:28:y:2021:i:c:s2212012221000393

DOI: 10.1016/j.ecotra.2021.100235

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