Project finance: a multi-criteria approach to arbitration

Abstract

Large investment projects in sectors such as transportation and natural resources require some risk allocation agreements to be financed at low interest rates. Focusing on these agreements made between the project company (or the sponsors) and other participants (the host government, the client, the supplier, the constructor, or the lenders) I propose a multi-criteria normative model to conduct the bargain decision-making process in a rational way. This model is based on compromise programming (CP) and it is specially designed for arbitration when the bargain process becomes deadlocked. Plausible theoretical and practical results are obtained, and a numerical example is developed.

Keywords:

• bargain models
• compromise programming
• multi-criteria analysis
• project finance