Contractual Efficiency of PPP Infrastructure Projects: An Incomplete Contract Model

Table 1

Equilibrium solutions of the basic model.

Equilibria	Establishing conditions				Default
A				ω1	○
				ω2	○
				ω3	Δ
B				ω1	○
				ω2	Δ
				ω3	Δ
C				ω1	○
				ω2	○
				ω3	×
D				ω1	○
				ω2	×
				ω3	×

Note. The establishing condition column shows the establishing conditions of the relevant equilibrium solutions. shows the expected payoffs earned by the SPV under equilibrium strategy . The ○ sign in the default column implies that the debt contract is not modified; the Δ sign means that the bank extinguishes part of the debt and the project continues. The × sign means that the SPV is liquidated. Define , , , , and .