A microeconomic perspective on infrastructure rehabilitation

Tarek Hegazy and Dina A. Saad

Construction Management and Economics, 2014, vol. 32, issue 5, 433-445

Abstract: Allocating limited capital-renewal (rehabilitation) funds among a large number of competing infrastructure assets has been a tremendous challenge for municipalities and public agencies. However, in the literature, there have been only limited efforts to provide economic approaches that can optimize, test, and justify fund-allocation decisions. In an effort to introduce such mechanisms, theories from microeconomics that maximize the return (utility) from consumer spending on multiple goods were adopted. To test the applicability of microeconomic concepts in the infrastructure fund-allocation problem, two case studies related to pavement sections and building components were carried out. An advanced mathematical optimization model was first developed and applied to the case studies to obtain optimum fund-allocation decisions. Then, the optimum decisions were analysed with respect to consumer theory to test the applicability of this theory in the fund-allocation problem. The analysis proved that the tested microeconomic approach applies perfectly to the infrastructure domain and that optimum decisions are achieved at an economic balance/equilibrium among the different expenditure categories. In essence, the wealth of well-established consumer theory has been introduced for its potential adoption in the infrastructure domain to improve and better justify infrastructure rehabilitation decisions.

Date: 2014
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DOI: 10.1080/01446193.2013.879193

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