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A Option Value of Busan-Gimhae Light Rail Vehicle

Kim, Min-jae 1 Youngsung Lee 2

1서울대학교 환경대학원 환경계획학과
2서울대학교

Accredited

ABSTRACT

This study aims to estimate choice value, which is considered in the decision-making process for public investment projects. Prevailing preliminary feasibility studies assess the benefit of projects based on the estimated demand of use for target facilities. Most of them do not consider the probabilistic change of potential use, since they only assess the deterministic welfare effect from planned usage. Thus, they do not always take the uncertainty between the present and future into account. In other words, prevailing studies do not reflect the uncertainty value even if consumers assess the value based on unexpected events, such as natural disasters, policy changes, and so on. The value from which consumers assess and reflect uncertain events of the future is the option value. The estimation of the option value may complement the weakness of recent feasibility studies by assessing the willingness to pay of potential consumers for public services. This study suggests a guideline on the decision-making process for public investment projects by estimating the willingness to pay for the option value, which has not considered the social or economic benefits and costs. In order to reflect such uncertainty, this study uses a choice experiment by suggesting various scenario cases based on different attributes and an estimation of the willingness to pay of consumers. This study takes into consideration such attributes for estimations of option value as providing transfer discounts, increasing oil taxes, and subsidizing commuting costs. Moreover, the study suggests scenario cases that consider the degree of such attributes. Finally, by estimating the parameters for option users and non-users, management strategies for BGL is suggested.

Citation status

* References for papers published after 2022 are currently being built.