Evaluation of restrictive competition in PPP projects using real option approach

•Current researches on guarantees mostly focus on scenarios of poor market demand.•Restrictive of competition guarantee is important as demand increases greatly.•Restrictive competition guarantee can be evaluated using real option approach.

In PPP projects, it is often necessary for host governments to provide guarantees to investors due to the large scale of investments involved, long tenure of the project, and hence greater risks. Although PPP has become a matured topic in construction management, research on evaluation of restrictive competition in PPP projects remains surprisingly scarce. With real option theory, this paper analyzes government's guarantee of restrictive competition in PPP projects, and constructs an evaluation model for restrictive competition. The results illustrate the significance of the valuation to both host government and investors, and provide them with a clear reference when negotiating on the level of restrictive competition.