A Decision-Making Model For Traffic BOT Projects Based On Market Demands

As a newly developed operation mode of project financing in recent years, BOT (build-operate-transfer) has been widely applied in the field of infrastructure and public facilities construction in both foreign and domestic. BOT projects, especially traffic BOT projects, play a significant role in many aspects such as reduction of governments’ finance pressure, improvement of the people’s livelihood, promotion of urban construction, as well as the absorption and usage of social idle capital. However, some BOT projects are not performed well. Due to the lack of scientific reasoning, wrong decisions are often made which cause the loss of social benefit, and the failure of projects. Based on this, in-depth research and discussion are made in this paper on concession decision-making problems from the angle of market demands.Firstly, focusing on the decision-making methods of traffic BOT projects, the following work is done through documents searching and case reviewing on both foreign and domestic BOT projects:the scope of concession period is defined, the factors which influence the concession period are summarized, the related research results on concession period and price are categorized. This helps to establish theoretical basis for the construction of decision-making model based on market demands.Secondly, some hypotheses are proposed on the basis of recognizing key factors that affect traffic BOT projects. Then, a dynamic game model of complete information is constructed on the basis of game theory, in which the project company decides the concession price after the government decides the concession period. Optimum concession period and concession price under market competition are derived, by using the method of backward induction, which provide basic reference for the government and company in real decision-making of traffic BOT concession agreement.Furthermore, traffic BOT projects are divided into three different conditions of high, medium and low according to the status of market demands, by comparing the relationship between the consumer’s willingness to pay and the range of government price control in the environment of market competition. Optimum decision results of government sector and company on concession period and concession price under different status are derived, while a discussion on the relevant properties and practical significance is conducted. Thus, a decision-making model for traffic BOT projects based on market demands is constructed, with its properties and realistic meanings discussed. Then, the above-mentioned results and discussion are proved to be feasible and of realistic meaning through the verification of numerical examples.Finally, the research conclusions of this paper were systematically summarized, which provides reference for government sector and company in making concession decisions for traffic BOT projects. Meanwhile, forecasts for further research were provided, due to the limitation of the research work mentioned in this paper.