Excess Revenue Allocation for Build-Operate-Transfer Highway Projects

Revenue uncertainty and volatility are problems in BOT highway projects because it is difficult to predict accurately future traffic volume. In high traffic demands, the absence of an excess revenue allocation mechanism leads to the private sector obtaining huge profits, and a high revenue risk to the government and the public. To solve this problem, the Black-Scholes ( B-S) pricing method is used to determine the revenue cap, and a dynamic model is proposed to determine the excess revenue allocation proportion considering the consumer surplus rate and the revenue cap. Finally, the proposed model is illustrated by a numerical example.