Uncertainty as a Management Evaluation Tool for Infrastructure Projects

Kingsley E. Haynes, Fred Y. Phillips and Rajendra K. Srivastava

Chapter 9 in Regional Science: Perspectives for the Future, 1997, pp 127-143 from Palgrave Macmillan

Abstract: Abstract Infrastructure policy is implemented through the planning for individual projects. Initial infrastructure planning is based on the simple calculus of rate of return on investment (ROI) or cost benefit (C/B) analysis, while infrastructure capacity expansion is a function of assessing existing capacity and forecasting future demand levels (Manne (1961; 1967), Meier (1977), Smith (1980), Freidenfelds (1981), Liebermann (1989)). However, the parameters of this calculus are embedded in substantial and pervasive uncertainty (Haynes and Li Qiangsheng, 1993). On the supply side, the future costs of existing infrastructure technology are made uncertain by volatility in the capital markets which affects interest rates and assumptions about appropriate discount levels (Haynes and Krmenec (1989), Haynes et al. (1984)). On the demand side, the increased reliance on user charges and their impact on the elasticity of demand increases uncertainty in forecasting usage levels. Further complicating uncertainties in supply and demand is the rapid pace of technological innovation, particularly in the telecommunications and transportation sectors, and the consequent impact on technological obsolescence and substitution. Witness the impact of telefax technology on the overnight letter delivery service and the effect of e-mail on both.

Keywords: Capacity Expansion; Infrastructure Project; Uncertainty Reduction; Hurdle Rate; Discount Level (search for similar items in EconPapers)
Date: 1997
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-25514-6_9

Ordering information: This item can be ordered from
http://www.palgrave.com/9781349255146

DOI: 10.1007/978-1-349-25514-6_9

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().