How CBA? If we assume that only people matter, the analysis naturally involves two steps 1 how the decision would affect the welfare of the each individual concerned 2. the change in social welfare implied by all the changes in individual welfare
How CBA? If we assume that only people matter, the analysis naturally involves two steps: 1. how the decision would affect the welfare of the each individual concerned. 2. the change in social welfare implied by all the changes in individual welfare
Case study: CBA to a ferry project The case a Suppose there is a river which at present can only be crossed by ferry The government considers building a bridge, which, being rather upstream, would take the traveler the same time to complete a crossing
Case study: CBA to a ferry project The case: n Suppose there is a river which at present can only be crossed by ferry. The government considers building a bridge, whi ch, being rather upstream, would take the traveler the s ame time to compl e t e a crossing
The case Bridge City City
The case Ferry Bridge City City
Case study: CBA to a ferry project The ferry is a privately owned monopoly and charges $0. 20 per crossing, while its total costs per crossing are $o, 15. It is used for 5,000 crossings per year. The bridge would cost $30,000 to build but would be open free of charge. it is expected that there will be 25,000 crossings a year with the bridge The ferry would go out of business
Case study: CBA to a ferry project n The ferry is a privately owned monopoly and charges $0.20 per crossing, while its total costs per crossing are $0.15. It is used for 5,000 crossings per year. n The bridge would cost $30,000 to build but would be open free of charge. It is expected that there will be 25,000 crossings a year with the bridge. n The ferry would go out of business
Case study: CBA to a ferry project Question: Whether to go ahead w边hte bridge?
nQuestion : whether to go ahead with the bridge? Case study: CBA to a ferry project