On the Traffic Administrative Department´s Moral Hazard in the Operation Mechanism of Highway Franchise Based on Incomplete Contracts

Based on the assumption of public choice theory and incomplete contracts, this paper establishes a game theory model, discussing about the traffic administrative department´s moral hazard in the operation mechanism of highway franchise - which is the enterprises´ optimum strategy and the whole social revenue under the loss of the government´s commitment. This paper argues that we should expand the transparency in the highway franchising operation and increase the cost of the government agents´ rent-seeking, thus to regulate the government´s dishonest acts.