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Considering build-later for major transit investments

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  • Chu, Xuehao
  • Polzin, Steven E.

Abstract

This paper uses a theoretical model of benefit-cost analysis to consider the timing of major transit investments. The model takes into account the net benefits of a project, the variation of net benefits with project age and investment timing, capital cost and its growth, and the discount rate. Three questions are examined: (1) when might build-later be evaluated? (2) how do changes in the discount rate and other parameters of an investment affect its optimal timing? and (3) how significantly do differences in the stream of net benefits from an investment affect its optimal timing? The first two questions are examined analytically, and the last question is examined numerically. Implications are discussed with respect to planning for major transit investments.

Suggested Citation

  • Chu, Xuehao & Polzin, Steven E., 1998. "Considering build-later for major transit investments," Transportation Research Part A: Policy and Practice, Elsevier, vol. 32(6), pages 393-405, August.
    • Handle: RePEc:eee:transa:v:32:y:1998:i:6:p:393-405
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    References listed on IDEAS

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    1. Richard C. Porter, 1984. "The Optimal Timing of an Exhaustible, Reversible Wilderness Development Project," Land Economics, University of Wisconsin Press, vol. 60(3), pages 247-254.
    2. Johnston, Robert A. & DeLuchi, Mark A., 1989. "Evaluation Methods for Rail Transit Projects," University of California Transportation Center, Working Papers qt3s89711q, University of California Transportation Center.
    3. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
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    Cited by:

    1. Petersen, E. R. & Taylor, A. J., 2001. "An investment planning model for a new North-Central railway in Brazil," Transportation Research Part A: Policy and Practice, Elsevier, vol. 35(9), pages 847-862, November.
    2. Li, Shuai & Cai, Hubo, 2017. "Government incentive impacts on private investment behaviors under demand uncertainty," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 101(C), pages 115-129.

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