A PPP Projects Valuation: Real Options, Competition and Anchoring Bias

This paper presents an integrated mathematical model for the evaluation of public-private partnership (PPP) projects, taking into account uncertainty, anchoring bias, and potential competition that may affect such investments. Before committing to a PPP project, private firms must carefully consider public opinion, as well as manage the uncertainty and possible competitive dynamics that may arise in the future. Anchoring bias is a cognitive bias in which investors have trust in a particular piece of market information, known as the anchor, when forming their investment decisions. Specifically, the paper combines the real options approach with game theory to account for competition and Natural Language Processing (NLP) techniques to capture the impact of market information disclosure. The result is an integrated model that serves as a decision-making tool for evaluating investments in PPP projects.