Research on negotiating the transfer price for T0T project financing mode based on game theory

Abstract

This paper extends the transfer-operate-transfer (TOT) concession model (Liu et al. 2002) to a new method for identifying a concession period by using bargaining-game theory. Transfer price is one of the most important decision variables in arranging a TOT-type contract, and there are few methodologies available for helping to determine the value of this variable. The previous model presents an alternative method by which determined are the win-win price level to furnish theoretic basis on which to form and decide the transfer price and TOT projects. Nevertheless, a typical weakness in using the previous model is that the model cannot recommend a specific time span for concessionary. This paper introduces a new method called TOT bargaining concession model to enable the identification of a specific concession period. The two parties concerned in engaging a TOT contract in the model are the investor and the government and their bargaining behavior is the key factor in the model. © 2014 Springer-Verlag Berlin Heidelberg.