Abstract
The option value of managed lanes (MLs) refers to the value travelers' place on having MLs as a backup option for possible use in the future, even if they are not using the MLs for their current trip. This research used detailed travel data from Katy Freeway MLs and general purpose lanes (GPLs) in Huston to estimate the option value of MLs. Based on these data, this research recommends ML option users to be defined as only those travelers who used MLs at least once a year as opposed to all travelers who could have used the MLs (even those who never used MLs).This research used the Small-Rosen log sum method (1981) and the Black-Scholes option pricing method (1973) to estimate the option value of MLs. The log sum method frequently provided an unrealistically high option value based on times when the option value should logically be close to $0. Thus, the Black-Scholes method was recommended. The option value of the MLs was found to be similar to the value of travel time savings from the MLs for the ML option users. Thus, the option value of MLs is an important component of the total value of MLs.
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