Real options methodology in public-private partnership projects valuation

Rakić, Biljana; Rađenović, Tamara

doi:10.2298/eka1400091r

Cited by 18 publications

(9 citation statements)

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“…In this study, selection criteria refer to parameters or criteria that female solo travelers employ to evaluate the capability and suitability of hotel attributes to produce positive experience. According to real options theory, female solo travelers' selection criteria serve as guidance but not obligation to make a decision (Rakic and Radenovic 2014). Understanding such guidance or selection criteria is useful for the hotel industry to predict female solo travelers' hotel decision (Folta and Miller 2002).…”

Section: Literature Reviewmentioning

confidence: 99%

Hotel Selection Criteria of Solo Traveling Females

Herjanto¹,

Chilicki²,

Anantamongkolkul³

et al. 2020

ajht

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Consumers use online e-reviews as a popular tool for information and obtaining guidance. E-reviews have therefore become an important barometer in conducting product evaluations, and more importantly, to make purchasing decisions. This includes decisions about hotel selection. For hospitality industry marketers, the information in e-reviews is particularly important in translating and understanding consumer-specific needs. The current study brings valuable awareness to the limited academic research into hotel selection criteria among solo-traveling females. TripAdvisor’s top 25 list of cost-efficient hotels worldwide received 345 total consumer reviews. Noteworthy findings of the current study show unique selection criteria considered important to the solo traveling female including a hotel-provided cell phone programmed with emergency local contact information, and a nearby or on-premise automated teller machine. Study results also indicate that stewardship service, such as intimate and personalized hotel staff who “go the extra mile” is an important selection criterion. Also discussed are research limitations and implications.

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Section: Literature Reviewmentioning

confidence: 99%

Hotel Selection Criteria of Solo Traveling Females

Herjanto¹,

Chilicki²,

Anantamongkolkul³

et al. 2020

ajht

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“…Several authors have used in many real options applications. Several authors have applied this model to infrastructure projects ( applied this model to infrastructure projects (Garvin & Garvin & Cheah, 2004Cheah, 2004;Iyer & Sagheer, 2011Iyer & Sagheer, 2011;Marques, Brandão, Marques, Brandão, & Gomes, 2019& Gomes, 2019;Oliveira, Couto, & Pimentel, 2020Oliveira, Couto, & Pimentel, 2020;Rakić & Rađenović, 2014Rakić & Rađenović, 2014, renewable energy ( ), renewable energy (Dalbem, Dalbem, Brandão, & Gomes, 2014Brandão, & Gomes, 2014;Santos, Soares, Mendes, & Santos, Soares, Mendes, & Ferreira, 2014Ferreira, 2014;Wesseh & Lin, 2015 Wesseh & Lin, 2015;;Zhang, Zhou, & Zhang, Zhou, & Zhou, 2014Zhou, 2014, mining ( ), mining (Miranda, Brandão, & Lazo, 2017Miranda, Brandão, & Lazo, 2017, ), and other fields of research. and other fields of research.…”

Section: Real Option Valuementioning

confidence: 99%

A Tutorial for Modeling Real Options Lattices from Project Cash Flows

2021

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Context: several methods for evaluating real options have been extensively studied and published. But recombining binomial trees, known as lattices, are perhaps one of the most practical and intuitive approaches to model uncertainty and price project managerial flexibilities for real options applications. Although the Cox, Ross, and Rubinstein (1979) lattice model is simple to implement for financial options, modeling real options lattices requires a different approach such as the one proposed by Copeland and Antikarov (2001), which considers project cash flows as dividends in the lattice model. Objective: in this tutorial, we propose a code in an open-source software with intuitive guidelines to help researchers and practitioners model real options lattices from project cash flows. Method: our code considers the correct project’s volatility estimation, dividend yield modeling, and lattice building. Results: the results show how real options can affect the value of projects. Conclusions: as a contribution, this tutorial provides a simple mechanism for analyzing investment opportunities in projects that have uncertainty and flexibility.

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“…The value of the non-competition guarantee can be assessed as real options. A put option gives the right to sell the asset if the price falls below the exercise price before the expiration date, and American options can be exercised at any time before the expiration date (Rakić and Rađenović, 2014; Xiong and Zhang, 2016). Under the competition, the value of the project is certainly lower than the expectation of the private sector and the government compensation may happen at any year before the concession period ends.…”

Section: Evaluation Of the Non-competition Guarantee Of Ppp Rental Retirement Villagesmentioning

confidence: 99%

Government compensation and costs of non-competition guarantee for PPP rental retirement villages

Liu

Jin

Liu

et al. 2019

ECAM

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Purpose Targeting public–private partnership (PPP) rental retirement villages, the purpose of this paper is to bring forward the solution of insufficient research in a non-competitive guarantee (a restrictive agreement) towards the compensation and guarantee costs in consideration of benefit redistribution if the governments are unable to keep the promise on guarantee provision. Design/methodology/approach Real option principles are applied to assess the public–private investment proportions and the expected return rates of the private sector in a non-competitive guarantee and analyse their effects on the public–private benefit and risk allocations as well as the success of the project. Instead of granting direct capital support, this research accomplishes the compensation of non-competition guarantee by adjusting the project benefit distribution ratios between the government and the private sector to achieve the option value of the guarantee. An empirical example with alternative scales, which is developed from an existing rental village in Geelong, is used to numerically verify the research process. Findings The results illustrate that the option value of the non-competition guarantee plays an important role in supporting the implementation of the PPP rental retirement village projects. The option value of the non-competition guarantee has a close relationship with the guarantee level and the government guarantee cost, which is positively correlated with the guarantee level and negatively correlated with the government guarantee cost. To reduce the government guarantee cost, the government should carefully determine the public–private investment proportion, appropriately control the return rate of the private sector and approve the construction of the new project after the investment recovery of the private sector. Research limitations/implications This research mainly focusses on the economic loss of the government due to the guarantee responsibility. Further research could be conducted to determine the guarantee level more precisely and take the social cost of the government guarantees into consideration. Originality/value This research is the first attempt to investigate the government compensation and costs of non-competition guarantee for PPP rental retirement village projects and will enhance the understanding of the nature of PPP applications. The evaluation process and the implementation of the compensation through the adjustment of benefit distribution provides a comprehensive method to analyse the non-competition guarantee of PPP projects and help the parties negotiate in good faith to agree on a method of redress.

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Real options methodology in public-private partnership projects valuation

Cited by 18 publications

References 0 publications

Hotel Selection Criteria of Solo Traveling Females

Hotel Selection Criteria of Solo Traveling Females

A Tutorial for Modeling Real Options Lattices from Project Cash Flows

Government compensation and costs of non-competition guarantee for PPP rental retirement villages

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