European Regional Science Association
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European Regional Science Association
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The abstract for paper number 494:
Francesca Medda, London School of Economics
, London, United Kingdom
A model of allocation of political risks between public and private in transport infrastructure provision
The involvement of the private sector in the development and funding of transport facilities and services ranges from management contracts for existing operations, to new infrastructure development. Central to the problem of transport provision through private and public partnership is the question of the allocation of risks between the public and the private sector. Those financing transport projects encounter different types of risk such as construction phase risks, operating risks and political risks, which affect provision. The paper examines how to allocate public sector guarantees relative to political risks in transport infrastructure investments to the private sector. The allocation of the guarantees by the public sector to the private is examined as a bargaining process between these two agents, and it is modelled with a final offer arbitration game. The results show that the risk allocation offered by the private sector is the selected one because it reduces the probability of a bad outcome.
Unfortunately full paper has not been submitted.