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The Weibull Probability Assignment Technique: An application to benefit‐cost analysis
Author(s) -
Mercer Lloyd J.,
Morgan W . Douglas
Publication year - 1975
Publication title -
water resources research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.863
H-Index - 217
eISSN - 1944-7973
pISSN - 0043-1397
DOI - 10.1029/wr011i005p00755
Subject(s) - weibull distribution , flexibility (engineering) , statistics , probability distribution , cost–benefit analysis , point estimation , sensitivity (control systems) , range (aeronautics) , computer science , reliability engineering , econometrics , mathematics , engineering , ecology , electronic engineering , biology , aerospace engineering
The flexibility of the Weibull distribution and the information gain made possible by its use to deal with the problem of uncertainty in benefit‐cost analysis are illustrated by application to a benefit‐cost study of water importation for Santa Barbara County, California. The Weibull distribution requires few estimated variables and a minimum of information, is relatively simple to work with mathematically, and can approximate the whole variety of distributions which may characterize input variables in benefit‐cost analysis. Use of the Weibull distribution provides the standard deviation and central tendency measures of the output (net benefit, benefit‐cost ratio, etc.) distribution in benefit‐cost analysis as well as the probability of outcomes indicating a project is not economically feasible. The application reported shows that the use of the Weibull distribution is superior to the usual point estimates and sensitivity tests in benefit‐cost analysis.