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Mathematical Problems in Engineering
Volume 2016 (2016), Article ID 3241973, 12 pages
http://dx.doi.org/10.1155/2016/3241973
Research Article

A Game of Two Elderly Care Facilities: Competition, Mothballing Options, and Policy Implications

1School of Finance, Zhejiang University of Finance & Economics, Hangzhou 310018, China
2China Academy of Financial Research, Zhejiang University of Finance & Economics, Hangzhou 310018, China

Received 14 April 2016; Accepted 14 July 2016

Academic Editor: Xiaodong Lin

Copyright © 2016 Congcong Wang et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This article develops a model to investigate the entry strategies of private investors to the elderly care service market, with the purpose of explaining the reasons behind dilemma of low signing rate plaguing China’s Public-Private Partnership projects. We focus on the competition between two private investors with or without mothballing options under price uncertainty. After the derivation of equilibria of entry strategies, we employ numerical examples to analyze the dependencies of entry thresholds on market parameters, cost parameters, subsidy, and possession of mothballing option. Conclusions are drawn and some policy implications are given with the intention to alleviate the problem of low signing rate.