Timing rules for major transportation investments

Xuehao Chu and Steven Polzin

Transportation, 2000, vol. 27, issue 2, 219 pages

Abstract: The timing decision for major transportation investments – when to build – typically is made without an objective approach for considering the economic value of implementation at different times. This paper uses a model of benefit-cost analysis and derives rules for timing major transportation investments. Three sets of conditions are considered, depending on whether annual benefits of an investment are uncertain and whether the objective is to maximize net present value or simply to achieve positive net present value. The timing rules under each set of conditions are stated in three forms: benefit-cost ratio, annual benefits, and implementation time. The paper compares these timing rules analytically, discusses potential applications, and illustrates them with a numerical example. Consequences of incorrectly using the timing rules are also examined with the example. Copyright Kluwer Academic Publishers 2000

Keywords: benefit-cost analysis; investment timing; major transportation investments; net present value; timing rules; uncertainty (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (2)

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DOI: 10.1023/A:1005235423898

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