The paper is an introduction to both theory and application of
combined Cost-Benefit and Multi-Criteria Analysis. The first
section is devoted to basic utility theory and its practical
application in Cost-Benefit Analysis. Based on some of the
problems encountered, arguments in favour of the application of
utility-based Multi-Criteria Analyses methods as an extension and
refinement of the traditional Cost-Benefit Analysis are provided.
The theory presented in this paper is closely related the methods
used in the WARP software (Leleur & Jensen, 1989). The
presentation is however wider in scope.The second section
introduces the stated preference methodology used in WARP to
create weight profiles for project pool sensitivity analysis. This
section includes a simple example. The third section discusses how
decision makers can get a priori aid to make their pair-wise
comparisons based on project pool sensitivity. Since pair-wise
comparisons contains information on the trade-off’s acceptable to
the decision maker, it is possible to calculate the shadow price
of the effect compared to a given price base. The final section
discusses two different approaches for the building of weight
profiles. These are denounced thematic and segregated weight
profiles. The use of weight profiles in the decision process is
briefly discussed.
| Number of pages | 12 |
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| Publication status | Published - 1996 |
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