A Theory of BOT concession contracts

In this paper, we discuss the choice for build-operate-and-transfer (BOT)
concessions when governments and Örm managers do not share the same information
regarding the operation characteristics of a facility. We show that larger shadow costs
of public funds and larger information asymmetries entice governments to choose BOT
concessions. This result stems from a trade-o§ between the governmentís shadow costs of
Önancing the construction and the operation of the facility and the excessive usage price
that the consumer may face during the concession period. The incentives to choose BOT
concessions increase as a function of informational asymmetries between governments and
potential BOT concession holders and with the possibility of transferring the concession
project characteristics to the public authority at the termination of the concession.