| PPP (public-private partnership) has been rapidly developed in the worldwide. Due to the nature of the huge investment, long concessional period and great risk, risk sharing is one of the core problems in PPP projects. In order to enhance investors confidence in participating in PPP projects, the government will share the project risk by providing certain guarantees. Taking the minimum revenue guarantee as an example, the investors can still get the appropriate value of the expected benefits when the actual revenue is lower than expected income, the differences between the actual return and expected is subsidized by the government. Because the benefits are related to costs, more returns require higher yields. As a result, investors may make income below the minimum guaranteed line deliberately to obtain the government guarantee. In the meanwhile, when the investors’ revenue is higher than the agreed income, the government has the right to share the excess returns which are generated by investors. However, investors may reduce earnings deliberately in order to avoid sharing additional revenue with the government. As a result, the government can take rewards and punishment incentive mechanism to avoid the occurrence of this kind of speculation.This paper integrates behavioral economics and evolutionary game theory to study the risk allocation problem and optimal incentives based on governments and investors risk,fairness, altruism and reciprocal preferences. Stemmed from the literature, based on the different risk preference coefficient between public sectors and investors , the theory of bargaining game has been applied to establish the PPP project’s risk distribution principle.Besides, fairness, altruism and reciprocal preference theories are integrated with the traditional principal-agent model in order to discuss how by project participants social preferences affect risk assessment results, investors behavior strategy selections and projects utilities, etc.. In addition, evolutionary game theory is applied to design rewards and punishment incentive mechanism based on the government guarantee and sharing of the additional revenue, and examine how could the government adjust incentive policies when cooperate with different investors with different risk and social preferences. Thereby providing the theoretical foundation and policy recommendations to facilitate risk-sharing negotiations, ensure the effectiveness of government monitoring mechanisms as well as improve the overall effectiveness of the project.Based on the different risk preference coefficient between public sectors and investors,the theory of real option and bargaining game has been applied to assign the option value between two parties and determine the optimal risk sharing ratio. Investors with high risk preferences mean they could bear more risks, otherwise,they could receive more government guarantee value when dealing with risks.Based on the H-M theory, this work designates the government and investors as the principal and agents, respectively, and introduces fairness, altruism and reciprocal preferences into the incentive model. PPP project risk allocation models based on the condition of asymmetric information were then generated. When examine how fairness preference impact the model can be seen, the optimal option of the government to increase utility and keep the risk-sharing ratio within a reasonable and affordable range is to hire investors with higher fairness preferences. As can be seen from the altruism model,non-subjective altruism would help private investors and the government to achieve a better win-win situation. The government can take advantage of altruism to guide investors into expending a high level of effort and maximize the utility levels of both parties. Project participants’ reciprocal preferences have complicated influences on risk-sharing results,which also affected by investors expected revenue and cost factors.According to the investors’ different kinds of profitability and the degree of cooperation with the government, they have been divided into five types, five different incentive evolutionary game models were established and analyzed based on risk and social preferences. In the face of the different characteristics of the investors,government could determine its profitability by examining the projects which the investors have participated in the past,collecting the companies’ economic indicators such as internal rate of return,investment income rate and so on. Then the appropriate incentives could be set based on investors, different characteristics, thus the social benefits would be maximized. In addition,government incentives are changed. In the beginning of the project, incentives could be set based on the companies’performance in the past. During the cooperation, investors’behavior may change, then the government should adjust the incentives according to the actual situation so as to achieve the effective incentive goals.Science project participants risk and social preferences has effects on their decision-making and cooperative attitude, as the project sponsor and manager, governments have to consider these preference factors when develop risk allocation policy and design incentive mechanisms. This paper verified the correctness and application value of the model by numerical simulation analysis. |
