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Bargaining optimization model for risk renegotiation with fairness concerns in infrastructure PPP projects

Canjun Chen (Business School, Hohai University, Nanjing, China)
Lelin Lv (Business School, Hohai University, Nanjing, China)
Zhuofu Wang (Business School, Hohai University, Nanjing, China)
Ran Qiao (Business School, Hohai University, Nanjing, China)

Engineering, Construction and Architectural Management

ISSN: 0969-9988

Article publication date: 26 April 2022

Issue publication date: 27 November 2023

228

Abstract

Purpose

Reasonable risk sharing is the key to the smooth implementation of infrastructure public-private partnership (PPP) projects and the optimization of benefit distribution among the participants. This study aims to explore the risk redistribution ratio between the government and the private sector under different degree of fairness concern.

Design/methodology/approach

Renegotiation is a mechanism to provide flexibility and make up for incompleteness of PPP contracts. However, the threshold value of risk redistribution ratio and negotiation cost are not explicitly considered in previous studies. In addition, these studies do not consider the influence of the fairness concern psychology on the negotiation process. To address these gaps, based on risk-income equilibrium analysis, this paper established the bargaining optimization model of PPP projects renegotiation considering the fairness concerns of the negotiating parties. Furthermore, this study analyzed the influence of fairness concern degree on negotiation thresholds, negotiation results, and negotiation incomes under three scenarios.

Findings

The results showed that excessive focus on the fairness of incomes may exclude the risk redistribution ratio that is most beneficial to project incomes from the negotiation threshold. Moreover, the increase in the fairness concerns of negotiating parties can reduce the negotiation success period, but the net income may not necessarily be improved.

Originality/value

The main contribution of this paper is to propose a new risk renegotiation methodology based on the risk-income equilibrium analysis, which is helpful to develop risk management strategies in the construction field. The research results can provide government with reference about renegotiation in decision making and provide theoretical support for the practice of PPP renegotiation.

Keywords

Citation

Chen, C., Lv, L., Wang, Z. and Qiao, R. (2023), "Bargaining optimization model for risk renegotiation with fairness concerns in infrastructure PPP projects", Engineering, Construction and Architectural Management, Vol. 30 No. 9, pp. 3876-3894. https://doi.org/10.1108/ECAM-11-2021-1006

Publisher

:

Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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