Optimization Analysis of Contract Negotiation of Public-Private-Participation Projects
In general, the infrastructure projects are with high economic and social benefits, but with low financial viability.
No need to say, the government needs to provide some incentives, such as subsidy or quarantine to allure the participation of
private sectors on the infrastructure projects. Win-win situation is the best results for both parties. However, there is no
attraction to private sectors if the government propose low subsidy, and it increase the government financial burden with
high government subsidy.
There are three major participants in PPP projects, which are the government (the client), the Project Company, and bankers
with different interests. We may say that it is a tri-party game in a PPP project. Thus, a cooperative game model is
constructed to determine the government subsidy, tariff, debt ratio, and interest rate, which may lead to a win-win-win
A cable car project at Kaohsiung first harbor is used as a case study for constructing the financial model. The results show
that the government subsidy =64%, tariff = 16.69 NT$, debt ratio = 46%, and interest rate = 8% in the case study. The
project value is 1.73 billion NT$. The Shapley value is 1.67 billion NT$ for the government, 3.8 million NT$ for the project
company, and 1.74 million for bankers. We may find a solution for this cooperative game, which implies that all parties meet
their benefit requirements.
Keywords- Public private partnership(PPP), Game theory, Cooperative game, Shapley value, Project negotiation.v