ABSTRACT
Transportation infrastructures, such as highways, railways, and airports, require a huge initial capital investment. They are often planned and constructed to serve the public for decades. Operating and maintenance (O&M) costs during the long service life of the infrastructure are another important cost component to be considered for effective revenue management. These two types of costs are relevant since superior construction quality requires higher capital investment to promote lower O&M costs during the service
CONTENTS
11.1 Introduction .............................................................................................. 257 11.2 Decisions under Build-Operate-Transfer (BOT) ................................ 259
11.2.1 Decisions under BOT without Options .................................. 260 11.2.2 A BOT Contract with Options ................................................. 262 11.2.3 Valuation of the Options ...........................................................264 11.2.4 Determination of Option Premium ........................................ 267
11.3 Case Study of a Highway Project .......................................................... 268 11.3.1 Case Description ........................................................................ 268 11.3.2 Option Valuation ........................................................................ 269
11.4 Numerical Results .................................................................................... 271 11.4.1 Decision Change Motivated by the RO Incentive ................. 271 11.4.2 Bene…ts of Option Premium ..................................................... 272 11.4.3 Total Social Welfare Improved ................................................. 272 11.4.4 Effectiveness of the RO Incentive ............................................ 272
11.5 Conclusions and Future Research ......................................................... 275 Acknowledgments .............................................................................................. 276 Appendix .............................................................................................................. 276 References .............................................................................................................277
