The role of the discount rate in tendering highway concessions under the LPVR approach.

Vassallo Magro, José Manuel (2010). The role of the discount rate in tendering highway concessions under the LPVR approach.. "Transportation Research Part A: Policy and Practice", v. 44 (n. 10); pp. 806-814. ISSN 0965-8564. https://doi.org/10.1016/j.tra.2010.08.001.

Description

Title: The role of the discount rate in tendering highway concessions under the LPVR approach.
Author/s:
  • Vassallo Magro, José Manuel
Item Type: Article
Título de Revista/Publicación: Transportation Research Part A: Policy and Practice
Date: December 2010
ISSN: 0965-8564
Volume: 44
Subjects:
Faculty: E.T.S.I. Caminos, Canales y Puertos (UPM)
Department: Ingeniería Civil: Transportes [hasta 2014]
Creative Commons Licenses: Recognition - No derivative works - Non commercial

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Abstract

Flexible-term highway concessions are becoming quite popular around the world as a means of mitigating the traffic risk ultimately allocated to the concessionaire. The most sophisticated mechanism within flexible-term concession approaches is the least present value of the revenues (LPVR). This mechanism consists of awarding the concession to the bidder who offers the least present value of the revenues discounted at a discount rate fixed by the government in the contract. Consequently, the concession will come to an end when the present value of the revenues initially requested has been eventually reached. The aim of this paper is to evaluate the effect that the discount rate established by the government in the bidding terms has on the traffic-risk profile ultimately allocated to the concessionaire. To analyze this effect, a mathematical model is developed in order to obtain the results. I found that the lower the discount rate the larger will be the traffic risk allocated to the concessionaire. Moreover, I found that, if a maximum term is established in the contract, the lower the discount rate, the less skewed towards the downside will be the traffic-risk profile allocated to the concessionaire

More information

Item ID: 6996
DC Identifier: http://oa.upm.es/6996/
OAI Identifier: oai:oa.upm.es:6996
DOI: 10.1016/j.tra.2010.08.001
Official URL: http://www.sciencedirect.com/science/journal/09658564
Deposited by: Memoria Investigacion
Deposited on: 17 May 2011 10:05
Last Modified: 20 Apr 2016 16:06
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