Evaluating Alternative Operations Strategies to Improve Travel Time ...

SHRP 2 L11: Final Appendices
Comment #10:
Because the experts we consulted differ on the validity of applying Black-Scholes to valuing
reductions in travel time variability, SHRP 2 Reliability staff held a number of supplemental
conversations to determine under what circumstances Black-Scholes might continue to be useful.
Both a member of SHRP 2 Staff and one of the reviewers suggested that the options theoretic
approach might be useful for ranking different ways to improve travel time reliability even though
one cannot be confident that calculated values from Black-Scholes have absolute meaning.
Response #10:
We believe that the measurement technique proposed is much more consistent and transparent than
one-off S-P or R-P findings. The value of travel time is already a necessary input to the travel
demand modeling process; our work simply extends the application of those time values to timecertain
equivalents of variables measures. Empirically, experienced travel modelers such as Blaine
have observed that traffic assignment became more realistic when our measure of the “impedance”
of volatility was included in link impedance specifications (for freeways).
Comment #11:
Reliability Project L11 brings to the attention of practitioners and decision makers an analytic
method that often is superior to traditional discounted cash flow or discounted present value
analysis. This is a valuable silver lining of this research and represents a contribution to the field
even if a consensus cannot be reached on the validity and applicability of the options theoretic
approach to imputing the economic value of improvements in travel time reliability.
Response #11:
This method is a contribution to the field and we also feel, that the approach provides advantages
over the S-P and R-P methods, as we detailed in Appendix B.
Recurring Event Reliability Valuation Example
The Issue
The transportation agency oversees a stretch of highway that experiences significant and variable
congestion in the a.m. peak period (6:00 a.m.-10:00 a.m.). This facility is 10 miles long, running
north/south, with the central business district (CBD) at the north end of the facility. Graphically,
the speed and variability characteristics of this facility are akin to those depicted in Figure B.5. The
large dip in speed at around 8 am reflects the slower commuting times during the peak, relative to
the other time blocks on the facility. The variability or unreliability in speed (as measured by the
standard deviation of speeds over the course of a year) also seems greater during the peaks.
As the a.m. peak-period speed and variability suggest, users on the facility face additional costs in
the form of extra time lost while traversing the facility due to travel-time variability. The agency is
interested in knowing the value of the time that would be saved if a strategy that would improve
travel-time reliability was implemented. This would help the agency to perform a Benefit-Cost
Analysis (BCA) for the strategy and decide whether it is worth implementing.
DETERMINING THE ECONOMIC BENEFITS OF IMPROVING TRAVEL-TIME RELIABILITY Page B-40