Including Risk into Socio-economic Evaluations of Transportation Projects

This paper explores simplified methods to integrate macro-economic risks into socio-economic evaluation of transportation projects. The objective is to enable the benefit-cost analysis to discriminate projects that differ in the risks they pose to the collectivity. This paper focuses on an approach based on the Von Neumann and Morgenstern framework of maximization of the expected utility. It first compares the use of Monte-Carlo simulations versus the use of a distribution of a limited number of scenarios. Then the authors test how the method reacts to more or less contrasted sets of scenarios. The scenarios were first applied to simplified projects and then to real ones. This paper concludes that the scenario-based approach appears to be applicable and that it seems possible to use a limited number of scenarios instead of Monte-Carlo simulations. With contrasted macroeconomic scenarios, this approach leads to rather low risk premium rates. The authors also concluded that the risk premium rates are specific to each project and therefore can hardly be standardized.

Language

  • English

Media Info

  • Media Type: Digital/other
  • Features: Figures; References; Tables;
  • Pagination: 10p
  • Monograph Title: Transport Research Arena (TRA) 2014 Proceedings

Subject/Index Terms

Filing Info

  • Accession Number: 01531231
  • Record Type: Publication
  • Files: VTI, TRIS, ATRI
  • Created Date: Jul 8 2014 9:55AM