How PPP Renegotiation Behaviors Evolve with Traffic Changes: Evolutionary Game Approach

Abstract

High risk in actual traffic demand often causes a serious imbalance in interests between the public and private sectors in transportation public–private partnership (PPP) projects. The party who suffers has the incentive to breach the contract and hopes to make up for their loss by renegotiating the PPP concessions. The high frequency of such concession renegotiations has raised questions about the viability of the PPP approach. To study how concession renegotiation behaviors evolve when actual traffic volume is lower or higher than expected, this study introduces traffic changes as a quantitative financial indicator. Moreover, it develops two evolutionary game models in which the private and public sectors initiate the renegotiation. The thresholds for renegotiation by the private and public sectors can be defined based on the models and provide decision support for the governance of concession renegotiation behaviors in transportation PPP projects to reduce the incidence and incentives to renegotiate PPP contracts.