2011 Volume 67 Issue 5 Pages 67_I_45-67_I_56
There have been a few attempts to apply the option value concept in the cost-benefit analysis for public transport services. Option values can be interpreted in terms of a risk premium that individuals with uncertain demand are willing to pay over and above their expected user benefit for the continued availability of a transport facility. This paper firstly reviews some issues associated with the evaluation of the option values for public transport, and secondly presents a case study to measure the consumers' surplus and option values for two railway links (LRT and local railway) in the city of Toyama, Japan. The study employs a methodology of stated choice method (SCM) rather than contingent valuation method (CVM) which has been often applied in the transport field. It gives an estimated range of the consumers' surplus from 300 to 500 yen per month per household, and the option values from 800 to 1,200 yen per month per household for the two railway links. The paper finally examines the inclusion of option values in the total benefit for Toyama LRT, and demonstrates the importance of option values in rail projects appraisal.
