Government expenditures have been largely expanding at a rapid rate in the world, and there is no indication this trend will be curtailed. The very nature of public work developed by these expenditures lends difficulty and uncertainty to the estimates of costs and benefits that make up the benefit-cost ratio used for public work justification.
This study presents idea, technique, and procedures for estimating benefits and costs by 3-point estimates and provides probabilistic analysis of benefit-cost analysis based upon the Beta-distribution under uncertainty.
The estimates of benefits and costs are easily estimated by 3-point estimates based upon subjective probability of experts. Therefore, this method removes difficulties and troublesomeness in using the current conventions in order to estimate benefit and cost.
Also, because the probabilistic models take account of the uncertainties in the future, this model may provide more realistic analysis than existing technique of public work justification. Thus the results provide the decision-maker with more realistic and reasonable information.
