Behavioral Economics in Infrastructure Fund-Allocation

摘要

Behavioral economics is a newly emerging field that tries to examine the impact of psychological factors such as attitudes, biases, and behaviors on decision makers’ choices. Because many decisions in construction involve subjective experience-based assessments of situations (e.g., bidding, fund-allocation, etc.), the psychological factors playing an important role in these decisions need to be considered. Among the most influential behavioral economic concepts is the “Loss-aversion”, which refers to people's tendency to strongly prefer avoiding loss than acquiring gain. This paper thus introduces common behavioral economic concepts and examines the applicability of the loss aversion perspective in the construction domain, particularly infrastructure rehabilitation projects. Using a pavement case study, a detailed life cycle cost analysis model has been developed and extensive optimization experiments were carried out to compare the traditional approach of maximizing the gain from a limited rehabilitation budget, with two loss-aversion approaches. The results show that incorporating behavioral aspects into infrastructure decisions can better account for the varying preferences among all stakeholders and thus can lead to higher public satisfaction and better fund allocation for infrastructure rehabilitation projects.