Alternative Model to Determine the Optimal Government Subsidies in Construction Stage of PPP Rail Transit Projects under Dynamic Uncertainties

Abstract

Urban rail transit is a quasioperational project and its net cash inflow can hardly cover the investment expenditure. It is essential to determine an acceptable amount of government subsidy to ensure the financial viability of the PPP projects, so as to encourage the entry of the private partner. The partners involved in PPPs have common interests but conflict regarding the value of government subsidy. Considering the uncertainty characteristic by PPPs and information incompleteness in the decision-making process, this study presents a methodology to calculate the equitable subsidy ratio favored by both participants. This study divides the decision process into two steps. First, this study constructs a financial model and introduces an acceptable range of subsidy ratio by using the Monte Carlo simulation method. Second, this study uses the bargaining game theory to determine a particular subsidy ratio under incomplete information. To verify the applicability of the presented model, the researchers invoke an illustrative example for model validation. This research provides a referential and operational method for the government and private sectors to make government subsidy decisions for quasioperational projects.

Enhancing the decision-making process for public-private partnerships infrastructure projects: a socio-economic system dynamic approach

“…Besides, it was found to increase when the public sector had a strong position. The results and findings by Lv et al [25] indicated that the loss factor for both the private and public sectors significantly influenced the equilibrium for the subsidy ratio. Notably, the implications of this study by Lv et al [25] can serve as the basis for future modeling scenarios.…”

“…The results and findings by Lv et al [25] indicated that the loss factor for both the private and public sectors significantly influenced the equilibrium for the subsidy ratio. Notably, the implications of this study by Lv et al [25] can serve as the basis for future modeling scenarios. Firstly, information uncertainty was one of the limitations that impacted decision-making.…”

“…However, it did not incorporate scientific techniques, and thus, its results and findings could have been biased. Lv et al [25] developed a tool to determine the appropriate subsidies for railway projects. Through a system dynamics approach, Lv et al [25] identified a level of acceptable government subsidies, which ensured that the Urban Rail Transit project was viable.…”

“…Lv et al [25] developed a tool to determine the appropriate subsidies for railway projects. Through a system dynamics approach, Lv et al [25] identified a level of acceptable government subsidies, which ensured that the Urban Rail Transit project was viable. This study incorporated the Monte Carlo Simulation tool and system dynamic technique to determine the acceptable range of subsidy.…”

How to Alleviate Rent-Seeking Behaviour in Performance Appraisal of Government-Paid PPP Projects? Tripartite Evolutionary Game Approach

“…In addition, rent-seeking is essentially opportunistic behaviour, and an incentive mechanism effectively solves opportunistic behaviour. Various incentive mechanisms mainly include reward and punishment mechanisms, government subsidies [26,27], government support [28], and government guarantees [29].…”