SWUTC Ph.D. Candidate Assistantship Project Description
Real Options Analysis to Value Managed Lanes
University: Texas A&M University
Principal Investigator:
Sunghoon Lee
Zachry Department of Civil Engineering
(979) 845-9875
Faculty Supervisor:
Mark Burris
Zachry Department of Civil Engineering
(979) 845-9875
Funding Source: USDOT Funds
Total Project Cost: $36,279
Project Number: 600451-00036
Date Started: 9/1/13
Estimated Completion Date: 12/31/14
Project Summary
Project Abstract:
Many studies of existing Managed Lanes (MLs) have concluded that the vast majority of travelers use MLs only occasionally. In this case, benefits estimated in the Benefit-Cost Analysis (BCA) procedure of the MLs may be small because it only estimates the actual use benefits. However, MLs could provide a choice opportunity as a backup (which can be interpreted as an option use value) for travelers even when they do not use MLs. MLs give the flexibility of travel decision making such as a time of
departure choice in the previous example, and travelers can use MLs depending on their unusual situation (e.g. unexpected congestion and hurried situation). Thus, it is obvious that the value of a freeway with MLs is different from the value of a freeway without MLs even if all travelers on the freeway do not intend to use the MLs. However, this option use benefit of MLs has not been considered. This may cause underestimation of benefits of MLs and hinder implementation of them to provide added capacity and to manage traffic congestion. Besides, judging from empirical discrepancy between willingness-to-pay (WTP) survey of MLs and actual usage (i.e. even though survey respondents express willing to use MLs at a specific toll price, they sometimes do not use MLs at that price.), travelers highly recognize benefits of MLs rather than benefits that can be obtained from the actual use of MLs.
The results of this research could greatly improve understanding of the value of these MLs. In addition, the methods will be developed could be a proper method to estimate the option use value of MLs. Ultimately, the methods and results could contribute to better estimate benefits of MLs in the BCA procedure.
Project Objectives:
The main purpose of research is to evaluate the option use value of MLs by examining each traveler’s utility when a traveler uses either the MLs or the GPLs using the revealed preference data.
Task Descriptions:
Task 1– Review of Literature
Task 2– Develop Methodologies
Task 3– Analysis of the Data
Task 4– Valuation and Application of Developed Methodologies
Task 5 – Prepare Final Report