Research On The Early Termination Compensation Of BOT Projects Based On Game Theory

With the rapid development of the world economy, the demands on construction of public infrastructure projects and public utilities is growing all over the world, which brings the construction of certain projects into a peak time. The huge demands together with huge investment are no doubt a serious challenge to government budget. BOT mode, rised on the certain background, is a financing method applying in the construction of public infrastructure projects and public utilities mainly led by private investors. Since BOT mode has the characteristic of complex financing structure, large investment, long payback period and high risk, the BOT projects may suffer crisis during the long concession period, which leads to early termination of BOT projects. In the practice of China, some BOT projects suffer bad operational status, even forced to an early termination. The early termination of BOT projects has become a front and hot issue in the field of project management.The early termination compensation is a fundamental core interest issue in both the signing phase of franchise agreement and the early termination negotiation. Without a reasonable solution, both sides will suffer endless disputes and huge loss. According to this, this thesis carried out the research on early termination compensation of BOT projects.In order to provide supporting references to the research on early termination compensation of BOT projects, literature review on related research was firstly conduct. By analyzing the applicability of using game theory to solve the issues of BOT projects’ early termination, this thesis holds that the early termination of BOT projects belongs to the cooperative game since a binding agreement has been formed. The existing research on the influencing factors, responsibility allocation and the compensation of early termination of BOT projects has been reviewed.After that, an early termination compensation model was constructed adopting cooperative game theory. Considering two distinct early termination context, the base hypothesis of cooperative game model was proposed. Then, after an early termination compensation model of BOT projects was constructed, proper model solving method was chosen to solve the constructed model. The results of early termination compensation in regard to three different early termination reasons was obtained. This thesis also discussed the method to quantify the related parameters Finally, this thesis analyzed a highway BOT project using the constructed models. The amount of early termination compensation of the highway BOT project was measured and calculate. The applicability of the constructed models was verified.