Location and Development of Light Rail Stations under Demand Uncertainty: A Real Options Based Framework

Bahrulla Abdulla, Rita Sousa, Abdulla Galadari

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

Given the deepening awareness of the limited nature of fossil fuel reserves and the environmental consequences of consuming it, the increasing appetite for better public transportation infrastructure persists worldwide. A huge amount of investments and resources is being injected into the development of transportation infrastructures, including light rail, as the need for better and faster transportation is correlated with the economic development of a country. However, there is a serious lack of understanding regarding the underlying uncertainties, as well as their impact on the performance of these infrastructure projects. As a consequence, performance results that are lower than the forecasts are very common in rail transportation and financial or social benefit of light rail transits deviate hugely from what is expected. In many of these cases, either the overall cost of the project turns out to be much higher or the patronage proves to be far less than originally forecasted. This study aims at reducing such a gap in the literature by considering the uncertain nature of the demand. More specifically, this study proposes a real options-based framework for the feasibility analysis of the potential locations of light rail stations. First, it estimates the demand for each proposed station location considering the endogenous uncertainties involved in the forecasting of demand. Second, the feasibility of different station development scenarios is analyzed using the net present value (NPV) method. Third, a real options analysis is done on various development scenarios by considering the possible values of incorporating flexibility in the development. Fourth, based on the level and nature of the uncertainty in the station demand for each location, the economic benefits of incorporating flexibility for the station-development are quantified. Using a case study approach, the proposed model is applied for a station location on Dubai Metro Purple Line. The results suggest that recognizing the major uncertainties at an early stage and incorporating flexibility into the system design accordingly pays off under certain circumstances.

Original languageEnglish (US)
Title of host publicationInternational Conference on Transportation and Development 2020
Subtitle of host publicationPlanning and Development - Selected Papers from the International Conference on Transportation and Development 2020
EditorsGuohui Zhang
PublisherAmerican Society of Civil Engineers (ASCE)
Pages151-160
Number of pages10
ISBN (Electronic)9780784483169
StatePublished - 2020
EventInternational Conference on Transportation and Development 2020: Planning and Development, ICTD 2020 - Seattle, United States
Duration: May 26 2020May 29 2020

Publication series

NameInternational Conference on Transportation and Development 2020: Planning and Development - Selected Papers from the International Conference on Transportation and Development 2020

Conference

ConferenceInternational Conference on Transportation and Development 2020: Planning and Development, ICTD 2020
Country/TerritoryUnited States
CitySeattle
Period5/26/205/29/20

ASJC Scopus subject areas

  • Civil and Structural Engineering
  • Mechanics of Materials
  • Geography, Planning and Development
  • Transportation
  • Safety, Risk, Reliability and Quality

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