Optimal subsidies and guarantees in public–private partnerships
Year: 2012
Type: article
Abstract: In this paper, we analyse how certain subsidies and guarantees given to private firms in public–private partnerships should be optimally arranged to promote immediate investment in a real options framework. We show how an investment subsidy, a revenue subsidy, a minimum demand guarantee, and a rescue option could be optimally arranged to induce immediate investment, compensating for the value of the option to defer. These four types of incentives produce significantly different results when we compare the value of the project after the incentive structure is devised and also when we compare the timing of the resulting cash flows.
Source: European Journal of Finance
Institutions: University of Minho, Universidade do Porto
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2060889481