Effects of asymmetric investment cost information on revenue-compensated build-operate-transfer highway contracts

Zhaoyang Lu and Qiang Meng

Transportation Research Part B: Methodological, 2023, vol. 172, issue C, 71-92

Abstract: In the planning stage of build-operate-transfer (BOT) highway projects, private firms usually possess more information about the investment cost than governments. This study considers the problem of how to design project contracts and regulate private firms whose investment costs are unobservable to governments. A principal-agent model is proposed to investigate this type of BOT contracts, in which governments aim to maximize social welfare, while the firms are guaranteed a reserved level of profit and have no incentive to misreport their costs. Besides, the extent to which the information asymmetries influence these contracts is examined, through an analysis of the effects of the distribution of marginal cost parameters and the shadow cost of public funds. Furthermore, properties of these contracts are discussed and compared with the revenue-compensated BOT contracts under symmetric cost information.

Keywords: Build-operate-transfer; Highway capacity; Toll charge; Government guarantee; Asymmetric cost information (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0191261523000553
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:transb:v:172:y:2023:i:c:p:71-92

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
https://shop.elsevie ... _01_ooc_1&version=01

DOI: 10.1016/j.trb.2023.03.011

Access Statistics for this article

Transportation Research Part B: Methodological is currently edited by Fred Mannering

More articles in Transportation Research Part B: Methodological from Elsevier
Bibliographic data for series maintained by Catherine Liu ().