01514831

Component

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

This paper was sponsored by TRB committee ABE20 (2) Behavioral Economics Call for Papers.

01503729

14-0828

English

13p

2014

Transportation Research Board 93rd Annual Meeting

Digital/other

Figures; References; Tables

Construction management; Decision making; Financing; Infrastructure; Life cycle costing; Psychological aspects; Resource allocation

Behavioral impacts

Construction; Highways; I50: Construction and Supervision of Construction

Transportation Research Board Annual Meeting 2014 Paper #14-0828

TRIS, TRB, ATRI

Jan 27 2014 2:21PM