Decision Of Concession Price Of PPP Project Based On Real Option Theory

A public-private partnership (PPP) is a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. Through allocating the venture and revenue reasonably, it can be a win-win or multi-win relationship. PPP has become more and more popular by both the private sector companies and the government. As the most important parameter, concession price is the key of the project’s success.On the basis of the previous, the paper analyze the influence factors of concession price by the numbers. Then the real option theory is introduced to the PPP project in order to aimed at the influence factors. Through evaluating the value of option and integrating into the traditional decision-making model of concession price, the paper build a more reasonable decision-making model of concession price based on real option. In the last, the paper make a case analysis to validate the ideas of using options to construct the model combining the concrete case. Through introducing the option, the paper supply some helpful to the decision-making of concession price and it also enrich the application of real option in PPP.