Modeling the impact of government guarantees on toll charge,road quality and capacity for Build-Operate-Transfer (BOT) road projects |
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| Institution: | 1. Department of Management Science and Engineering, School of Transportation and Civil Engineering, Fujian Agriculture and Forestry University, No. 15, Shang Xia Dian Road, Cangshan District, Fuzhou, Fujian Province 350002, China;2. School of Economics and Management, Southwest Jiaotong University, Chengdu, Sichuan Province 610031, PR China;3. Department of Management Science and Engineering, School of Economics and Management, Southwest Jiaotong University, Chengdu, Sichuan Province 610031, PR China;1. Department of Construction Management, School of Economics and Management, Southwest Jiaotong University, Chengdu, Sichuan Province, 610031, P.R. China;2. School of Economics and Management, Southwest Jiaotong University, Chengdu, Sichuan Province, 610031, P.R. China;3. School of Business, Management and Social Sciences, Quest International University Perak, Malaysia;4. Power China South Construction Investment Co., LTD, 518000, P.R. China;1. Business School, Sun Yat-sen University, Guangzhou 510275, PR China;2. School of Business Administration, South China University of Technology, Guangzhou 510640, PR China |
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| Abstract: | Government guarantees are frequently used to attract private investors’ participation into Build-Operate-Transfer (BOT) road projects. In this paper, we investigate the impact of government guarantees on toll charge, road quality and road capacity by taking perspective of the private investor. The main results are: (1) Minimum traffic guarantee increases toll charge while decreasing road quality. Under a low guarantee level, minimum traffic guarantee has no impact on road capacity. However, it improves road capacity when a high guarantee level is performed. (2) Under minimum revenue guarantee, if the guarantee level is sufficiently high, the optimal toll charge will be sufficiently large, but road quality and road capacity will approach zero. (3) Price compensation guarantee decreases toll charge and increases both road quality and road capacity. This paper further investigates the impact of government guarantees when the contract is auctioned. We find that auction reduces the impact of government guarantees on toll charge while failing to affect the impact of government guarantees on road quality and capacity. Some policy implications are also derived from our model results. |
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| Keywords: | BOT Government guarantees Toll charge Road quality Road capacity |
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