Behavioral Economic Concepts for Funding Infrastructure Rehabilitation

Behavioral economics is a newly emerging field that examines the impact of psychological factors such as attitudes, biases, and behaviors on decision makers’ choices. Because many decisions in engineering and management involve subjective experience-based assessments of situations (e.g., bidding and fund-allocation), the psychological factors playing an important role in these decisions need to be considered. This paper thus introduces common behavioral economic concepts and examines the applicability of the most influential behavior loss aversion in the asset management domain, particularly infrastructure rehabilitation projects. Loss aversion refers to people’s tendency to strongly prefer avoiding loss more than acquiring gain. Using a pavement case study, a detailed life cycle cost analysis model has been developed and extensive optimization experiments were carried out to compare the traditional approach of maximizing gain from a limited rehabilitation budget against loss-aversion approaches. The results show that incorporating behavioral aspects into asset management decisions can better justify the decisions made and account for the varying preferences of stakeholders and thus can lead to higher public satisfaction and more justifiable spending of tax money.

Language

  • English

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Filing Info

  • Accession Number: 01536472
  • Record Type: Publication
  • Files: TRIS, ASCE
  • Created Date: Aug 14 2014 3:03PM