An Ordinal Game Theory Approach to the Analysis and Selection of Partners in Public–Private Partnership Projects

Abstract

Nowadays, public-private partnership projects have become a standard for delivering public services in both developed and developing countries. In this paper, we are concerned with the analysis of private sector proposals and the selection of the private sector partner to whom to award the contract. To the best of our knowledge, this problem has not been addressed within a game theory framework. To fill this gap, we model this decision problem as a static non-cooperative game of complete information and propose a new ordinal game theory algorithm for finding an optimal generalized Nash equilibrium. The proposed algorithm determines a single ranking of proposals or bidders that takes account of multiple performance criteria and reflects both the public sector and the private sector perspectives, and can handle any number of private sector players and any number of contractual terms. An illustrative scenario is provided to guide the reader through the workings of the proposed ordinal game theory algorithm. The proposed ordinal game theory-based analysis framework can be used by the private sector to analyse any set of potential proposals most likely to be submitted by bidders and to assist with the choice of bidding strategies, and by the public sector player to analyse any set of potential proposals most likely to be submitted under any set of contractual terms and to assist with the choice of a realistic set of contractual terms and their performance measures.

Empirical Analysis of Firms’ Willingness to Participate in Infrastructure PPP Projects

“…Second, as creating value is the critical purpose of PPP projects, the private partner should possess some traits, such as value-added capacities (Steijn et al, 2011), entrepreneurship (York et al, 2013), resource complementarities (Kivleniece and Quelin, 2012), trust and confidence (Panda, 2016), to create and ensure value for money (VFM), minimize transaction costs, and achieve positive externalities (Mouraviev and Kakabadse, 2015;Kivleniece and Quelin, 2012). Third, from public sector's perspective, as selecting partners directly influences the PPP project performance (Song and Xu, 2011;Ouenniche at al., 2016), the public sector will make some requirements about the partner, such as firm size, project experience, financial capacity, and commitment (Farquharson et al, 2011;Boussabaine, 2014;Zhang, 2005b), so as to choose the right partner for service provision. Finally, in terms of how to attract or promote private participation, previous research has also provided some attractive conditions, such as project profitability or stable cash flows (Koppenjan and Enserink, 2009;Panayiotou and Medda, 2014), long-term commitments (Akhmouch and Kauffmann, 2013), quality of institutions (Percoco, 2014), and fair risks allocation (Tecco, 2008), which increase the likelihood of private participation in infrastructure projects.…”

Private‐sector partner selection for public‐private partnership projects of electric vehicle charging infrastructure

“… 1 = Zhang; 2 = Zhangb; 3 = Ouenniche et al; 4 = Kumaraswamy & Anvuur; 5 = Tang et al; 6 = Zhang; 7 = Zhangb; 8 = Zhang et al; 9 = Liu et al. …”

Risk Assessment Regarding the Implementation of Public-Private Partnership Projects in the World Practice

“…At the time of presentation of conditions not envisaged by legislation, it is necessary to consider the extent of competence of the public partner. Also, to ensure the principle of equality of conditions, the state partner should provide such additional conditions in the tender documentation (Ouenniche et al, 2016). The category of risks plays a significant role in public-private partnership (Postnikova, 2017).…”