Value of Bayesian Pre-Posterior Information for Enhancing Life-Cycle Cost Analysis of Highway Investments

Assessing risk in life-cycle cost and benefit estimates of highway investments is recommended by major organizations such as the World Bank and the U.S. Federal Highway Administration. This challenging task needs methodological support. Mutually exclusive investment alternatives can differ in terms of the costs of construction, maintenance, rehabilitation, and end-of-life value. Due to many causal factors and the long life of highway infrastructure, these items cannot be estimated with certainty. To go beyond the study of the sources of uncertainty, a method is needed to check the economic feasibility of acquiring additional information for deeper insight. This paper reports on research on the value of Bayesian pre-posterior information for refining the life-cycle cost analysis of uncertain costs and benefits for evaluating highway investment alternatives. Example applications demonstrate how the Bayesian pre-posterior analysis can be applied to check the feasibility of obtaining new information for enhancing the life-cycle cost analysis of highway investments. The value of Bayesian pre-posterior information is illustrated for reducing risk. Also, depending upon the specifics of uncertain states, a change in the choice of the investment alternative for implementation can be investigated. The product of this research can potentially upgrade highway infrastructure planning and management practices.