Research on PPP Project Performance Reward and Punishment Compensation Mechanism Based on Evolutionary Game Model

Currently, most public-private partnership (PPP) compensation mechanisms only consider how to incentivize social capital, but ignore the financial pressure that compensation schemes bring to government departments. In this study, an evolutionary game model is constructed by considering the dynamic game between the government and social capital, combined with incentives and penalties, and system dynamics are introduced for simulation. Based on the model solution, the values of the reward and punishment coefficients under the performance objective and the variance function are calculated. The study shows that the government should increase the value of the reward and punishment coefficient or change the compensation strategy to encourage the private sector to adopt a high-effort strategy. When the social benefit of the output under the social capital effort strategy is greater than the minimum compensation level of the government minus the economic benefit output, the government department should adopt a single reward and punishment coefficient strategy, otherwise a variance reward and punishment coefficient strategy should be adopted, to achieve improved performance while reducing their financial pressure. This study expands the research perspective of PPP compensation and proposes the idea of using different compensation strategies to reduce the compensation amount based on motivating the private sector to actively improve its performance, which is conducive to alleviating the government’s financial pressure.