Infrastructure Development and Expansion under Uncertainty: A Risk-Preference-Based Lattice Approach

Abstract

Optimal infrastructure development and expansion decision making requires taking into account contingent expansion decisions and underlying uncertainty, such as demand, during the planning period. Recent publications on life cycle management have used lattice models and Markov decision models to evaluate infrastructure development and management policies. In this paper, a risk-preference based lattice model is presented, and it provides the optimal contingent decisions in terms of a risk preference that can be other than risk neutrality. The proposed methodology is demonstrated in an example involving constructing and expanding a parking garage.