Incomplete Contract And Trust:Study On Mixed Governance Signal Game Model Of PPP Projects

The government and social capital cooperation model is also known as the PPP model(Public Private Partnership),which is a partnership between the government and the social capital to seek the integration of resource advantages.During the cooperation period,the government and social capital will share risks and benefits to achieve common goals.As PPP projects are easily affected by transaction risks,governance plays an important role in determining the success or failure of PPP projects.Traditional literature on contract governance of PPP projects is mostly based on the assumption of self-interested people by social capital,using economic research frameworks,trying to reduce the negative impact of incomplete contracts through ownership allocation,social capital remuneration mechanism and risk sharing.However,in the practice of PPP projects,there are some projects that have not signed a complete contract but have successfully achieved the project goals,while some projects try to reduce the incompleteness of the contract when the contract is signed,but fail to complete the project results.It can be seen that the research on contract governance of PPP projects based on the traditional economic research framework has certain defects.The classic incomplete contract theory emphasizes that governance models need to be selected based on differences in transaction costs.However,many scholars have proposed that incomplete contracts can improve the efficiency of inter-organizational cooperation.From the perspective of inter-organizational cooperation,a less complete contract is conducive to enhancing the trust between the parties to the cooperation and establishing a more collaborative relationship.Based on the theory of incomplete contracts,the proper incompleteness of PPP contracts may help promote the generation of trust and increase the benefits of PPP projects.This research focuses on how the content of the contract affects the social capital’s understanding of the PPP relationship,and uses the signal game research method to explore whether the complete contract designed in the traditional sense to improve the social capital’s effort and prevent opportunistic behavior affects the generation of trust and The realization of trust governance.This research constructs a mixed governance signal game model for PPP projects,considers the factors of trust governance in the model,and discusses the government’s optimal strategy choice in different situations.Through model construction and solution,this research has obtained enlightening conclusions that the existence of appropriate incompleteness in PPP contracts can transmit trust signals to the social capital,and there is a substitution effect between contract governance and trust governance in PPP projects.The research conclusions provide a theoretical basis for government departments to make decisions when designing and managing contracts for PPP projects.From the industry level,the trust signal released by the government is also conducive to increasing the enthusiasm of social capital to participate in PPP projects,improving the quality of PPP projects,and promoting the sound development of the PPP industry.The current domestic social capital is not very enthusiastic about participating in the PPP model.A very important reason is that the government is both the referee and the contestant in the PPP project.In consideration of the protection of public interests and the prevention of opportunistic behavior by the social capital,the government leads the design of the PPP contract and also leads the performance evaluation of the PPP project.Too strict PPP contracts and low right to speak in the project make the social capital side discourage PPP projects.At the current stage of China’s PPP industry,the government should appropriately reduce its control over contracts,release signals of trust,and increase trust governance on the basis of traditional contract governance,so as to increase the enthusiasm and effort of social capital.In addition,according to the research conclusions of this article,the government can formulate the content of the contract based on its level of trust in the social capital and the project context.For example,in the scenario where the PPP project adopts the return mechanism of the feasibility gap subsidy,if the user pays a high proportion and the government bears the transaction risk exceeding the benefits that it can obtain by transmitting the trust signal,then the government should choose to formulate a stricter Contract clauses are governed by contract;if the proportion of user fees is low,then the government can obtain greater benefits by choosing appropriate and incomplete contract clauses.At this time,the use of a mixed governance model can increase the benefits of PPP projects,and it can also improve the social The trust of the capital side increases its enthusiasm for participating in PPP projects.This research mainly draws the following four conclusions.First,reducing the completeness of contract governance in a PPP project within a reasonable range transmits a signal of trust.The moderate incompleteness of the PPP project contract is the basis for trust.Second,th e relationship between the contract mechanism and the trust mechanism is not a complementary relationship,but an alternative relationship.Third,for governments with different types of trust,two factors need to be considered when choosing a governance model.Fourth,if the amount that can be restricted by restrictive clauses has exceeded the revenue increased by sending trust signals,both types of government parties choose contracts with restrictive clauses.The preliminary exploration of the mixed governance of PPP projects in this study can well make up for the shortcomings of current research,and the research conclusions show that the incompleteness of PPP project contracts will affect the generation of trust,which establishes a connection between PPP contract governance and PPP trust governance.,Thus adding a new research perspective to PPP project governance.In addition,this study proves that contract governance and trust governance in PPP projects are not complementary,but substitute.According to the research conclusions of this study,the government can send a signal of trust to the social capital by appropriately reducing the completeness of contract governance.As PPP projects often involve a large amount of dedicated investment in the early stage,the trust of the social capital party in the government can reduce the transaction risk it perceives when facing a large amount of dedicated investment.Trust promotes the efforts of both the government and the social capital,which not only increases the income of PPP projects,but also enhances the enthusiasm and motivation of the social capital to participate in PPP projects,thereby promoting the long-term healthy development of the PPP industry.