Public–private Partnership in Land Compensation for an Eco-Cultural Park: Game Theoretical Analysis

Abstract

This study focuses on compensation issues in Luang Namtha province (player LNT), Laos, where the laissez faire compensation seems widely inapplicable. Solving the problem of an eco-cultural Park, a public-private partnership investment project that has been delaying since 2011, we argue, lies in readjusting the bargaining power between affected households and player LNT backed by the project investor. However, in the de facto household's perspective, the game is merely a Chicken game, which is described by player LNT's harsh penalty based on Ultimatum or Dictatorship game that appears not be prescribed strictly. We find to enhance the ex-ante sustainability of the compensation the autocratic/unautocratic style of the provincial leadership and the household's bargaining power can be key. Specifically, the project investor should contribute to the compensation payment based on the leadership style and the household's bargaining power rather than player LNT's monetary penalty system. Lastly, we discuss the household's expected payoff based on random leadership style.