Project selection with sets of mutually exclusive alternatives

Harald Minken

Economics of Transportation, 2016, vol. 6, issue C, 11-17

Abstract: We study the problem to maximise the net economic benefit of an investment plan by selecting from a portfolio of candidate projects within a given budget constraint. As is well known, with independent projects the economic efficiency of the entire investment plan is maximised if projects are selected according to their benefit-cost ratio until the budget is exhausted. Often, however, the planning of a project involves a stage where a set of alternative concepts or designs are considered. A best alternative is chosen, and the plan is composed from the pool of all such best alternatives. This procedure violates the assumptions underlying the benefit-cost ratio criterion.

Keywords: Project selection; Mutually exclusive projects D61 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecotra:v:6:y:2016:i:c:p:11-17

DOI: 10.1016/j.ecotra.2016.06.001

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