Scandinavian Working Papers in Economics

CERE Working Papers,
CERE - the Center for Environmental and Resource Economics

No 2018:7: Evaluating Large Projects when there are Substitutes: Looking for Possible Shortcuts

Per-Olov Johansson () and Gines de Rus
Additional contact information
Per-Olov Johansson: CERE - the Center for Environmental and Resource Economics
Gines de Rus: University of Las Palmas de G.C., FEDEA and University Carlos III de Madrid

Abstract: This paper discusses how to evaluate a large project when there is a substitute. The new large project causes discrete price adjustments in the substitute market. For example, a new high-speed rail may shift the demand curve for flight tickets to the left and reduce their price, in turn shifting the demand curve for train tickets to the left. There are several different ways to handle this complication, and we hopefully provide some guidance how to proceed. In particular, we point at an approach that captures the general equilibrium effects of a considered project in its output market. In theory at least, this approach provides a simple short-cut in cost-benefit analysis of (infrastructure and other) projects that are so large that they have a noticeable impact on equilibrium prices in other markets. A similar shortcut for transport projects that affect time costs is also supplied.

Keywords: Cost-bene fit analysis; large projects; substitutes; time costs

JEL-codes: D61; H43; R40

23 pages, September 17, 2018

Full text files

papers.cfm?abstract_id=3253023 PDF-file Full text

Download statistics

Questions (including download problems) about the papers in this series should be directed to Mona Bonta Bergman ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2024-02-05 17:13:36.