DIFFERENTIAL OPTIMAL INVESTMENT TIMING DECISION MODEL FOR NONLINEAR DYNAMIC URBAN INFRASTRUCTURE PLANNING SYSTEM

Abstract

With the acceleration development of urbanization, the infrastructure construction plays an increasingly crucial role in the expansion process of cities. However, the existing decision-making methods of urban infrastructure investment still stay at the static level, resulting in a huge waste of resources, which does not meet the needs of dynamic urban development and management. Based on geometric Brownian motion, option function and the theory of real option, this paper establishes a dynamic differential optimal investment opportunity decision model applied to urban infrastructure construction. An example was then conducted to test the operability and application of the proposed model. The results confirm that the proposed approach contributes to improving the scientificity of urban infrastructure planning and construction, and realizing the maximization of infrastructure’s social value. Meanwhile, this paper contributes to promoting the development of city infrastructure investment decision-making methods from static to dynamic, and from partial to overall.