Stackelberg Game Theory-Based Optimization Model for Design of Payment Mechanism in Performance-Based PPPs

Shang, Luming; Aziz, Ahmed M. Abdel

doi:10.1061/(asce)co.1943-7862.0001806

Cited by 37 publications

(36 citation statements)

References 40 publications

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“…Currently, game theory is had extensive employments in whole fields of social science, logic, systems science, and computer science also ( [17][18][19][20][21]). In construction management, game theory has been employed in various aspects, from the preconstruction stage to the construction period, to explain and predict outcomes, such as: claim decision model [22], risk management [23], design payment mechanism [24], subcontractor cooperation [25].…”

Section: Definition Of Game Theorymentioning

confidence: 99%

Applying the noncooperative game model for compensation concept in contractor selection process for large-scale projects

Son

Anh

2021

STCE

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Nowadays, the scale of construction projects has been larger and more complex, the tender preparation is often costly to the bidder thus. It is becoming one of the primary barriers for attracting bidder’s involvement, as well as contractor's encouraging high effort. Bid compensation concept is proposed as a reward to foster the bidder participating in a higher endeavor. Game theory is ideal for modeling the dynamics and deriving high-effort strategies for bid compensation. The experiment results have demonstrated the owner can gain benefit by using rational compensation. The sensitivity analysis also shows the interest correlation between the owner and bidders. By choosing a proper strategy based on Nash Equilibrium solutions, both the owner and bidders can reach to win-win situation.

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Section: Definition Of Game Theorymentioning

confidence: 99%

Applying the noncooperative game model for compensation concept in contractor selection process for large-scale projects

Son

Anh

2021

STCE

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“…e recent studies on PPP project performance mainly include the influencing factors of PPP project performance [12][13][14][15], construction and evaluation methods of performance goals, key performance indicator systems [16][17][18], availability payment [19][20][21], safe payment [22][23][24], combined payment mechanism [3,4,25], and other specific performance payment mechanisms designs. ese studies research the performance planning link in the performance management of PPP projects and provide a robust theoretical basis for the subsequent study on the vital link of the PPP project performance payment: performance appraisal.…”

Section: Literature Reviewmentioning

confidence: 99%

“…A scientific and reasonable payment mechanism is one of the keys to implementing government-paid PPP projects successfully. In recent years, the payment mechanism of government-paid PPP has evolved from a usage-based method to a performance-based method [3].…”

Section: Introductionmentioning

confidence: 99%

“…Although there are many rent-seeking behaviours in PPP performance appraisal [6,11], the recent studies on PPP project performance management mainly focused on the influencing factors of PPP project performance [12][13][14][15], construction and evaluation methods of performance goals, crucial performance indicator systems [16][17][18], availability payment [19][20][21], safe payment [22][23][24], combined payment mechanism [3,4,25], and other specific performance payment mechanism designs. Rare attention was paid to the behaviours between the private investor and the third party in performance appraisal, a key part of performance management.…”

Section: Introductionmentioning

confidence: 99%

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

Tan

et al. 2021

Discrete Dynamics in Nature and Society

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Performance appraisal is a key link in the performance payment mechanism of government-paid Public-Private Partnership (PPP) projects. As the performance appraisal of PPP projects is highly professional and complex, it is usually necessary to introduce a third-party performance appraisal institution to evaluate the project outputs of the private investor. However, driven by economic rent, the private investor has the incentive to seek rent from the third party in the performance appraisal process, leading to the low overall performance level of PPP projects and the inability to achieve the PPP performance appraisal goal effectively. To explore how to avoid rent-seeking in performance appraisal and improve the overall performance of government-paid PPP projects, a tripartite evolutionary game model between the behaviour, third party, and the public sector has been constructed. Based on the evolutionary game model, this study analyses the evolutionary stability of each player's strategy, discusses the influence of various factors on the strategy selection of the three-party, and further analyses the stability of the equilibrium point of the three-party game system. The findings reveal that the public sector can slow down the rent-seeking behaviour of the private sector by setting up a reasonable reward and punishment mechanism. The design of a reasonable reward and punishment mechanism must meet the following conditions: (1) the sum of the reward and punishment of all parties is greater than the speculative income; (2) the amount of performance fee withheld for the private investor is greater than the difference between the project operating cost saved and the speculation cost. The research provides technical support for the design of the performance appraisal mechanism of government-paid PPP projects.

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“…Gao and Zhao (2018) suggested that the public sector increases its fines with dynamic adjustment strategies that improve the active cooperation of the private sector. Shang and Aziz (2020) studied a Stackelberg game theory-based optimization model and proposed the design of payment mechanisms for PPPs with both public and private sectors' interests considered. Moreover, some research has emphasized the importance of the general public in PPPs.…”

Section: Introductionmentioning

confidence: 99%

An evolutionary game analysis of user-pay public–private partnership projects

Song

Yuan

et al. 2020

ECAM

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PurposeWith the growing demand for infrastructure and public services in recent years, PPP-UP have attracted a great deal of attention. However, while the user focuses on the payment for use and the private sector is concerned with its return on investment, the public sector pays more attention to the efficient utilization of public funds. In order to analyze the willingness of each stakeholder to join PPP-UP, an evolutionary game model involving the three parties is constructed.Design/methodology/approachAn evolutionary game model is established that considers the users and the public and private sectors in user-pay public-private-partnership projects (PPP-UP). Eight scenarios of equilibriums and the game's evolutionary stable strategies are analyzed, and the corresponding stability conditions are then obtained. A situation where all three players are willing to cooperate in theory is also examined. The key influencing parameters that affect cooperation behaviors are further discussed.FindingsFirst, the results illustrate that by properly adjusting the influencing factors, the cooperation status among the three parties can be changed along with certain evolutionary trends. Second, it is hard to modify unsatisfactory evolutionary stability by small changes in both the price compensation of and the construction and operation compensation. Third, it is necessary to involve the users in the decision-making process in PPP-UP and take their demands regarding benefits and payments into account.Originality/valueIn this paper, we focus on PPP-UP to research interactions among the public and private sectors and the users. Based on the analysis of the evolutionary game, to facilitate the successful implementation and development of a project, several conditions are needed to ensure tripartite cooperation. Several recommendations are then proposed for decision-makers in PPP-UP.

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Stackelberg Game Theory-Based Optimization Model for Design of Payment Mechanism in Performance-Based PPPs

Cited by 37 publications

References 40 publications

Applying the noncooperative game model for compensation concept in contractor selection process for large-scale projects

Applying the noncooperative game model for compensation concept in contractor selection process for large-scale projects

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

An evolutionary game analysis of user-pay public–private partnership projects

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