Transit technology investment and selection under urban population volatility: A real option perspective

Zhi Chun Li, Qian Wen Guo, Hing Keung William Lam, S. C. Wong

Research output: Journal article publicationJournal articleAcademic researchpeer-review

27 Citations (Scopus)


This paper addresses transit technology investment issues under urban population volatility using a real option approach. Two important problems are investigated: which transit technology should be selected and when should it be introduced. A real option model is proposed to incorporate explicitly the effects of transit technology investment on urban spatial structure in terms of households' residential location choices and housing market. The trigger population thresholds for investing in a transit technology project and for shifting from a transit technology to another are explored analytically. Comparative static analyses of the urban system and transit technology investment are also carried out. It was found that (i) transit technology investment can induce urban sprawl; (ii) ignoring the effects of transit technology investment on urban spatial equilibrium can lead to a late investment; and (iii) there is a significant difference in the trigger population thresholds for transit technology shift estimated by the net present value approach and the real option approach.
Original languageEnglish
Pages (from-to)318-340
Number of pages23
JournalTransportation Research Part B: Methodological
Publication statusPublished - 1 Aug 2015


  • Comparative static analysis
  • Net present value approach
  • Population volatility
  • Real option approach
  • Transit technology investment and selection
  • Urban spatial equilibrium

ASJC Scopus subject areas

  • Civil and Structural Engineering
  • Transportation

Cite this