Investment in public transport: a real options approach

Current real options models only evaluate the impact of demand uncertainty on the timing of public transport investments. This project considers an investor in public transport infrastructure who maximizes social welfare and an investor in public transport service that maximizes profit. By the development of a sequential real option game, this project will evaluate how demand uncertainty affects the optimal capacity level and optimal timing of both investments and how the investment in public transport infrastructure influences the investment in public transport services. To make relevant decisions for the public transport sector, existing real option game models need to be adapted: the investment is considered as a determinant of public transport demand. The integration of such feedback relation is novel and unconventional in the field of the real options theory. Furthermore, also optimal policy measures to induce a welfare maximizing behavior of the transport service provider will be evaluated. This research project will not only advance the current state-ofthe- art, it also contributes to ongoing discussions on the liberalization of the public transport sector. By setting up a collaboration between the University of Antwerp, Tilburg University, the Norwegian University of Science and Technology, and Hasselt University, we have an outstanding scientific team that has proven to produce original research in the field of transport economics and the real options theory.

Keywords:PUBLIC TRANSPORT, TRANSPORT ECONOMICS

Disciplines:Applied economics