Can game theory be used to address PPP renegotiations?

: a retrospective study of the Metronet : London Underground PPP

Abstract

Public Private Partnerships (PPPs) have been introduced in many countries in order to increase the supply of public infrastructure services. The main criterion for implementing a PPP is that it will provide value for money. Often, however, these projects enter into financial distress which requires that they either be rescued or retendered. The cost of such a financial renegotiation can erode the value for money supposed to be created by the PPP. Due to the scale and complexity of these projects, the decision either to rescue or retender the project is not straightforward. We determine whether game theory can aid the decision making process in PPP renegotiation by applying a game theory model retrospectively to the failure of the Metronet - London Underground PPP. We study whether the model can be applied to a real PPP case, whether the application of this model would have changed the outcome of the case and, finally, whether and how the model can be used in future PPP renegotiations. We show that the model can be applied but that its parameters are not easy to quantify, that the model indicates that the outcome of our case was correct and, finally, that as long as the users of the model are prepared that it can be used in to aid decision making in future PPP decision making.

Date of Award	27 Jun 2013
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Ricardo Reis (Supervisor) & Joaquim Miranda Sarmento (Co-Supervisor)