Cost overruns and demand shortfalls - Deception or selection?
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Cost overruns and demand shortfalls - Deception or selection? / Eliasson, Jonas; Fosgerau, Mogens.
I: Transportation Research Part B: Methodological, Bind 57, 2013, s. 105-113.Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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TY - JOUR
T1 - Cost overruns and demand shortfalls - Deception or selection?
AU - Eliasson, Jonas
AU - Fosgerau, Mogens
PY - 2013
Y1 - 2013
N2 - A number of highly cited papers by Flyvbjerg and associates have shown that ex ante infrastructure appraisals tend to be overly optimistic. Ex post evaluations indicate a bias where investment costs are higher and benefits lower on average than predicted ex ante. These authors argue that the bias must be attributed to intentional misrepresentation by project developers. This paper shows that the bias may arise simply as a selection bias, without there being any bias at all in predictions ex ante, and that such a bias is bound to arise whenever ex ante predictions are related to the decisions whether to implement projects. Using a database of projects we present examples indicating that the selection bias may be substantial. The examples also indicate that benefit-cost ratios remain a useful selection criterion even when cost and benefits are highly uncertain, gainsaying the argument that such uncertainties render cost-benefit analyses useless.
AB - A number of highly cited papers by Flyvbjerg and associates have shown that ex ante infrastructure appraisals tend to be overly optimistic. Ex post evaluations indicate a bias where investment costs are higher and benefits lower on average than predicted ex ante. These authors argue that the bias must be attributed to intentional misrepresentation by project developers. This paper shows that the bias may arise simply as a selection bias, without there being any bias at all in predictions ex ante, and that such a bias is bound to arise whenever ex ante predictions are related to the decisions whether to implement projects. Using a database of projects we present examples indicating that the selection bias may be substantial. The examples also indicate that benefit-cost ratios remain a useful selection criterion even when cost and benefits are highly uncertain, gainsaying the argument that such uncertainties render cost-benefit analyses useless.
KW - Appraisal
KW - Cost escalation
KW - Cost overruns
KW - Cost-benefit analysis
KW - Forecast accuracy
KW - Selection bias
UR - http://www.scopus.com/inward/record.url?scp=84885198753&partnerID=8YFLogxK
U2 - 10.1016/j.trb.2013.09.005
DO - 10.1016/j.trb.2013.09.005
M3 - Journal article
AN - SCOPUS:84885198753
VL - 57
SP - 105
EP - 113
JO - Transportation Research. Part B: Methodological
JF - Transportation Research. Part B: Methodological
SN - 0191-2615
ER -
ID: 181872050