Stochastic Dominance Approach to Evaluate Optimism Bias in Truck Toll Forecasts

Rajorshi Sen Gupta and Sharada R Vadali

MPRA Paper from University Library of Munich, Germany

Abstract: Optimism bias is a consistent feature associated with truck toll forecasts, à la Standard & Poor’s and the NCHRP synthesis reports. Given the persistent problem, two major sources of this bias are explored. In particular, the ignorance of operating cost as a demand-side factor and lack of attention to user heterogeneity are found to contribute to this bias. To address it, stochastic dominance analysis is used to assess the risk associated with toll revenue forecasts. For a hypothetical corridor, it is shown that ignorance of operating cost savings can lead to upward bias in the threshold value of time distribution. Furthermore, dominance analysis demonstrates that there is greater risk associated with the revenue forecast when demand heterogeneity is factored in. The approach presented can be generally applied to all toll forecasts and is not restricted to trucks.

Keywords: Forecast Bias; Operating costs; Risk assessment; Savings; Stochastic Dominance; Tolls; Trucks (search for similar items in EconPapers)
JEL-codes: C15 D81 R41 (search for similar items in EconPapers)
Date: 2007, Revised 2008
New Economics Papers: this item is included in nep-for, nep-ore, nep-upt and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:12891

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