Uncertainty in the economic evaluation of transportation projects

Abstract

This thesis describes the methods and results of an investigation into the nature and impacts of uncertainty on the current economic evaluation practices in New Zealand. The thesis consists of four parts. Part I introduces the issue of uncertainty and decision making within the context of transportation planning. Part II takes a critical look at the economic evaluation procedures for urban projects in New Zealand, with particular reference to the underlying concepts and the possible areas of deficiency; via a case study and with the use of a traffic model in conjunction with the formal evaluation procedures, the sources of error and uncertainty associated with the current evaluation practices in New Zealand are identified and discussed. Part III presents the results of risk analysis performed on some rural transport projects. The techniques of sensitivity analysis and Monte Carlo simulation have been utilised for estimating and quantifying the uncertainty in the projects. Various measures of risk and the concept of stochastic dominance have been put forward as aids to the process of decision making. The methodology of Monte Carlo simulation and the selection of probability distributions for various input parameters are also described. Lastly, Part IV records the conclusions, implications and recommendations arrived at for this study.