Inaccuracies in Cost and Demand Forecasts
Decisions regarding transport infrastructure investments should rest, at least in theory, on ex-ante cost and demand projections. These serve to determine the size and capacity of the new facility, its design attributes (e.g., number of lanes), the extent of support facilities (e.g., access roads and intersections), as well as expected operational and maintenance costs and revenues (e.g., farebox or tolls). The associated social costs and benefits should likewise be based on empirical estimation. This chapter focuses on how cost and demand projections are to be made and why significant biases commonly enter into the forecasting process. We subsequently ask how these projections are used in reality. We leave a discussion of other external impacts from investments, such as environmental degradation costs and economic development benefits, to Chap. 10.
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