Comparison of Distribution Procedures in Blended Finance

Abstract

Abstract: This paper is devoted to the blended (joint) finance mechanism of a megaproject consisting of several projects. One part of the megaproject budget comes from the megaproject manager and the other part from project contractors. When distributing this budget, the megaproject manager considers information about the amount of the contractor’s internal funds allocated to project implementation. Project contractors seek to get more funds from the megaproject manager; in turn, the megaproject manager is interested in attracting more funds from project contractors. To achieve this goal, the megaproject manager applies different procedures to distribute the budget. Project contractors use the information reported to the megaproject manager to increase the funds allocated to them. Straight and reverse priority distribution procedures in the blended finance mechanism are analyzed. A distribution procedure is determined that stimulates project contractors to allocate more of their internal funds to the project in a Nash equilibrium.