The Study Of Infrastructure BOT Project Investment Decision Based On Option Game

It is solved the puzzle of construction fund for infrastructure by the appearance of BOT financing and sped up the infrastructure construction step in China. But there are several characteristic of BOT projects in infrastructure such as investing too much, long payback period and irreversibility, so how the decision-makers make the choice is the key for investment. At present, the traditional investment decision-making method is unable to scale the influence of future uncertainty, the irreversibility and competitiveness to the value of infrastructure BOT project and it doesn't scale the value of management flexibility, finally the value of project will be underestimated.This paper analyzes different kinds of characteristic of infrastructure BOT project and bases on the construction cost and operation cost to classify the infrastructure BOT project into four types and establishes decision-making model of concession term that bases on option-game model in Infrastructure BOT project investment, last author gives an example to validate the model. The existing literature only handled game method to investigate the decision problem of concession term but not yet research the concession term of flexibility and the uncertainty. First this paper discusses the flaw of traditional investment decision-making method in the solution infrastructure BOT project investment, and points out that there are option to defer and growth option two kinds of real options in the infrastructure BOT project investment. This paper establishes investment opportunity decision-making model based on defer to option to find out the best opportunity to invest. Secondly, this paper also analyzes the characteristic of option game in infrastructure BOT project investment and the influence of the growth option's value to government and project company. And the author finds the option game method to be possible to solve the concession term flexible problems for both sides. To take this as the foundation, the author supposes the concession term for a variable to government decision-making, and adopts game option method to analyze the investment behavior under the condition that the government make the concession term certain to establish decision model of concession term and decision model of construction cost-invest. Last, this paper discusses the influence of operation cost to concession term and gives an example to confirm the feasibility of the model.The discussion of equilibrium solution show that the project companies that have the growth option would increase investment for achieving its strategic target to enhance the lifecycle of project under the condition that the government reduces concession term and solves the difficult problem for government that prolong concession term to guarantee the infrastructure construction quality.