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The effects of service level on BOT transport project contract

Yiwen Zhang, Zhuo Feng, Shuibo Zhang and Jinbo Song

Transportation Research Part E: Logistics and Transportation Review, 2018, vol. 118, issue C, 184-206

Abstract: For many BOT transport projects, the government imposes service level requirement on the private firm so that project capacity and stochastic demand can be better matched. We define service level as the probability of project capacity satisfying uncertain demand. The results suggest that the presence of service level requirement improves both user fee and project capacity, and also improves consumer surplus while decreases firm profit. We have made two extensions to investigate the government’s optimal service level, and to compare service level requirement with capacity regulation and price cap regulation. Some managerial insights offered by model results are discussed.

Keywords: BOT; Contract design; Service level; Government regulation (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:transe:v:118:y:2018:i:c:p:184-206