Research On Contract Design Of BOT Project Based On Signal Transfer Theory

The BOT model,as the main mode of operation for domestic public infrastructure,has actively promoted changes in public services,reduced financial pressure to a certain extent,and enhanced public satisfaction with high-quality products and services.However,since local governments have more information channels than private enterprises on future policies,municipal planning and public satisfaction,they may use asymmetric information to practice opportunistic behaviors,infringe on private enterprises’ interests and reduce private enterprises’ willingness to invest.Therefore,based on the signaling theory,this paper explores how local governments can use contract design to transmit information and promote cooperation between government and enterprises,in view of the information advantage of local governments.This paper firstly introduces the development of PPP projects in the process of promoting urbanization strategy in China and the real problems in the situation of landing and implementation,and composes and analyzes the current situation of research on contract design and informed principals of PPP projects.Secondly,the theories related to BOT model,public goods,contract economics and signaling are introduced,which lay the theoretical foundation for the later research on local government contract design.Again,the current situation of private enterprise participation in BOT projects is described,the causes and manifestations of opportunistic behavior of local governments in BOT projects are analyzed,and a contractual decision model of BOT projects under symmetric information is constructed.After that,a Rothschild-Stiglitz-Wilson(RSW)allocation and an interim efficient allocation are constructed to analyze how the local government uses contract design to transmit its advantageous information in view of the existence of information advantages of the local government in the market potential demand and transportation demand price sensitivity factor.Finally,numerical simulations were conducted using the case data to analyze and verify the model results.It is found that local governments can transmit information through contract design,private firms can identify local government information types by observing menu contracts at the cost of lowering overall social welfare,and local governments can improve the level of social welfare distortion by setting information rents below a threshold value to achieve segregated allocation.This paper complements the research on contract design of BOT projects under asymmetric information and extends the application of signaling theory in BOT projects to provide a reference for local governments on contract design issues in BOT projects.