Port investments on coastal and marine disasters prevention: Economic modeling and implications

Yi bin Xiao, Xiaowen Fu, Adolf K.Y. Ng, Anming Zhang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

39 Citations (Scopus)

Abstract

Located along shorelines, seaports are highly vulnerable to coastal and marine natural disasters largely due to climate change. Damage caused by disasters can be prevented or alleviated if sufficient investments are made in a timely manner. However, despite a wide range of investment options and well-developed engineering expertise, port investment on disaster prevention remains a challenging task involving great complexities. This paper develops an integrated economic model for the analysis of disaster-prevention investments at a "landlord" port. It simultaneously considers the uncertainty of disaster occurrence and associated return of prevention investments, the information accumulation and related investment timing, and the benefit spillovers of investment among stakeholders. Our analysis shows that the timing of port investments depends on the probability of disasters. Immediate investment is optimal for disasters with very high probability, while investment should be postponed if such a probability is very low. Optimal timing for cases of intermediate probability cannot be determined analytically, as it is influenced by other factors such as discount rate, information accumulation and efficiency of investments. Positive spillovers between a port and its tenants lead to under-investment, which can be corrected by coordination between stakeholders. However, since there are risks of "overinvestment" (the marginal benefits of investments are zero ex post if there is no disaster), regulatory intervention is not always optimal when the regulator does not have a good understanding of disaster probability distribution. Therefore, scientific research would bring significant economic and strategic value to policy, planning and investment decisions.

Original languageEnglish
Pages (from-to)202-221
Number of pages20
JournalTransportation Research Part B: Methodological
Volume78
DOIs
Publication statusPublished - 1 Aug 2015
Externally publishedYes

Keywords

  • Benefit spillover
  • Disaster prevention
  • Information accumulation
  • Investment coordination
  • Investment timing

ASJC Scopus subject areas

  • Civil and Structural Engineering
  • Transportation

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