Game theory based understanding of dynamic relationships between public and private sectors in PPPs

Abstract

The relationships between public and private sectors in public private partnership (PPP) projects can be visualised as structured across different layers: activity layer, resource layer and actor layer. However, these relationships are dynamic and will change when the principal parties face particular problems or encounter serious issues during the long life cycles of most PPP projects. A game theory based approach for understanding such dynamic relationships is developed in this study. In this approach, the dynamic relationships between public and private sectors are analysed as a cooperative game, from risk allocation and financial negotiation to project operation. Variables which influence this relationship are identified from an international questionnaire survey; and will be incorporated into the final game theory based model. This paper presents an approach and corresponding methodology for conceptualising and understanding the behavioural dynamics of the main parties in PPPs. It also provides a theoretical foundation for research on relationships in PPPs.