Stochastic Optimization Model and O(N2) Solution Algorithm for Highway Investment Decision Making under Budget Uncertainty

Abstract

One of the key tasks in highway investment decision making is to conduct project selection. The existing optimization models for project selection concerning an entire highway system do not address the issue of budget uncertainty, limiting their ability to produce truly optimal results. This paper presents a stochastic optimization model that explicitly addresses budget uncertainty in highway investment decision making. The model is formulated as the stochastic multichoice multidimensional Knapsack problem with Ω -stage budget recourses that facilitates the selection of a subset of candidate highway projects, proposed to address the needs of a highway system across a multiyear project selection and programming period, in the most cost-effective manner. An efficient solution algorithm with the computational complexity of O ( N2 ) is developed for the proposed model. A computational study is performed to compare the investment decision outcomes by applying the proposed model with and without budget uncertai...