Abstract:

In PPP project， the escalation of commitments of stakeholders is a common behavioral risk. This risk aggravates the loss of the project， and even cause the failure of the project. Therefore， analyzing the resource input strategy of escalation of commitment of government and investor in PPP projects is crucial for improving project performance. Firstly， the mathematical model is used to construct a threshold model of escalation of commitment of the government and investors based on economic evaluation standards. Then， due to the correlation between the maximum additional resource cost of the government and investors and the internal rate of return of the project， there are differences in the threshold and probability of success for both parties’ escalation of commitment. The government’s proposal of additional investment is taken as an example to discuss the psychological process of bargaining between two parties in two scenarios. Meanwhile， based on game theory， the bargaining game between the government and investors on the commitment is further constructed. Finally， a pilot project of Sponge City in City A is selected as a case to analyze the threshold model and game model through numerical examples. The economic threshold of the escalation of commitment of the government and investors， the negotiation interval of the escalation of commitment， and the optimal resource input of escalation of commitment are determined. It is found that the internal rate of return of project and non-cash income demand of stakeholders are important factors affecting the additional resources of the government and investors， and non-cash income can raise the economic threshold of stakeholder’s escalation of commitment. The findings have important realistic significance for controlling the cost of escalation of commitment of stakeholders and improving the behavior risk governance mechanism of PPP project behavior.

Key words: PPP project, escalation of commitment, threshold, bargaining game