Abstract
Large-scale public projects are evaluated by their B/C ratio, the social benefits divided by the costs. Although both benefits and costs are uncertain, the uncertainty is not typically taken into account. We model the uncertainties of both benefits and costs and propose a new concept of “probability of fulfillment, ” the probability that the benefits exceed the costs even after a certain period of time. We further propose a new project-evaluation method under uncertainty by deriving the relationship between the ex-ante criterion for B/C and the probability of fulfillment.
