Optimization of Concession Period for Public Private Partnership Toll Roads


  • Ke Feng School of Economics and Management Engineering, Beijing University of Civil Engineering and Architecture
  • Shouqing Wang Department of Construction Management, Tsinghua University
  • Chunlin Wu School of Economics and Management, Beihang University
  • Guangtao Xia School of Economics and Management, Tsinghua University
  • Wangyin Hu School of Social Sciences, Tsinghua University




Optimization, Concession Period, Public Private Partnership, Toll Roads, Numerical Analysis


In the past decades, public private partnership (PPP) has been widely used as an effective approach to stimulating private investment and improving supplies for public services. The optimization of the concession period is very critical for the successful implementation of PPP projects. This paper takes decision making activities of the concession period as a bargaining game process between public and private sectors, and presents a mathematical model to calculate the optimal concession period under a series of assumptions. Backward induction is applied to solve this optimization problem. Finally, numerical simulation is used to further verify the model and analyze the influence of different factors on the optimal concession period. The results indicate that the optimal toll rate should be determined based on the average level of service provided. Factors such as the risk interest rate, initial investment, reservation utility are positively correlated with the optimal concession period, while the private equity ratio and the toll rate are negatively correlated with it. The current study is a useful supplement to previous research works as it incorporates the influence of public equity and time value of money into the construction of model. Moreover, it can act as a helpful reference for both public and private sectors in negotiations concerning related issues.

Author Biography

Chunlin Wu, School of Economics and Management, Beihang University

Chunlin Wu is an assistant professor/master’s supervisor in the School of Economics and Management, Beihang University (Beijing University of Aeronautics and Astronautics). He earned his PhD degree in Engineering at Tsinghua University, and has bachelor degrees in both management and English. He has published more than 20 academic papers, including 14 papers on top SCI/SSCI international journals. He serves as corresponding reviewers for many top journals. He has participated in three projects of National Natural Science Foundation of China (NSFC) and nine consultant projects from major national enterprises. As the academic elite, he worked on many industry-study-research projects for Shanghai Railway Bureau, Hangzhou municipal government, Shenzhen municipal government, Power Construction Corporation of China, and China Resources Land Limited. He has broadly conducted academic cooperation with experts from home and abroad, and he has a long-term cooperation with experts from the United States, Australia and the United Kingdom, etc. His research interests and areas includ Project management; Risk management; Organizational leadership and culture; Occupational health, safety and environmental management; Corporate social responsibility and sustainable development; Building Information Modelling (BIM); etc.

Additional Files