Transaction Cost Analysis of PPP Risk Share

Li, Mei, Li, Qiming, & Deng, Xiaopeng (2008) Transaction Cost Analysis of PPP Risk Share. In Proceedings of 2008 International Conference on Construction and Real Estate Management, China Architecture & Building Press, University of Toronto, Ontario.

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PPP (Public Private Partnerships) is a new operation mode of infrastructure projects, which usually undergo long periods and have various kinds of risks in technology, market, politics, policy, finance, society, natural conditions and cooperation. So the government and the private agency should establish the risk-sharing mechanism to ensure the successful implementation of the project. As an important branch of the new institutional economics, transaction cost economics and its analysis method have been proved to be beneficial to the proper allocation of risks between the two parts in PPP projects and the improvement of operation efficiency of PPP risk-sharing mechanism. This paper analyzed the transaction cost of the projects risk-sharing method and the both risk carriers. It pointed out that the risk-sharing method of PPP projects not only reflected the spirit of cooperation between public sector and private agency, but also minimized the total transaction cost of the risk sharing mechanism itself. Meanwhile, the risk takers had to strike a balance between the beforehand cost and the afterwards cost so as to control the cost of risk management. The paper finally suggested three ways which might be useful to reduce the transaction cost: to choose appropriate type of contract of PPP risk-sharing mechanism, to prevent information asymmetry and to establish mutual trust between the two participants.

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ID Code: 28666
Item Type: Conference Paper
Refereed: Yes
Keywords: transaction cost, PPP, risk share
Subjects: Australian and New Zealand Standard Research Classification > BUILT ENVIRONMENT AND DESIGN (120000) > BUILDING (120200) > Building Construction Management and Project Planning (120201)
Divisions: Past > QUT Faculties & Divisions > Faculty of Built Environment and Engineering
Past > Schools > School of Urban Development
Copyright Owner: Copyright 2008 Please consult the authors.
Deposited On: 18 Nov 2009 05:06
Last Modified: 10 Aug 2011 15:35

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