El-Khatib, Mayar2011-01-202011-01-202011-01-202010http://hdl.handle.net/10012/5741While decision-making under uncertainty is a major universal problem, its implications in the field of transportation systems are especially enormous; where the benefits of right decisions are tremendous, the consequences of wrong ones are potentially disastrous. In the realm of highway systems, decisions related to the highway configuration (number of lanes, right of way, etc.) need to incorporate both the traffic demand and land price uncertainties. In the literature, these uncertainties have generally been modeled using the Geometric Brownian Motion (GBM) process, which has been used extensively in modeling many other real life phenomena. But few scholars, including those who used the GBM in highway configuration decisions, have offered any rigorous justification for the use of this model. This thesis attempts to offer a detailed analysis of various aspects of transportation systems in relation to decision-making. It reveals some general insights as well as a new concept that extends the notion of opportunity cost to situations where wrong decisions could be made. Claiming deficiency of the GBM model, it also introduces a new formulation that utilizes a large and flexible parametric family of jump models (i.e., Lévy processes). To validate this claim, data related to traffic demand and land prices were collected and analyzed to reveal that their distributions, heavy-tailed and asymmetric, do not match well with the GBM model. As a remedy, this research used the Merton, Kou, and negative inverse Gaussian Lévy processes as possible alternatives. Though the results show indifference in relation to final decisions among the models, mathematically, they improve the precision of uncertainty models and the decision-making process. This furthers the quest for optimality in highway projects and beyond.enhighway developmentdecision making under uncertaintyreal optionsjump processesinfinitely divisible distributionsLévy processesmeasure theorycharacteristic functioncharacteristic exponentLévy jump measureprobability measurecádlág stochastic processWiener processPoisson processcompound Poisson processfinite activity modelsjump diffusion modelsMerton modelGaussian jump processKou modeldouble exponential jump processleptokurticvolatility smileinfinite activity modelspure jumps processgeneralized hyperbolic modelmodified Bessel functionnegative inverse Gaussian modelgeometric Brownian motion modellog-normal distribution modelnormality assumptionheavy-tailed distributionasymmetric distributionquantile-quantile plotRydberg algorithmparameter calibrationmomentscummulantssum of squaresMonte Carlo simulationleast-squares regressionbackward dynamic programmingdiscrete-time Markov chainland pricetraffic demandhighway service quality indexdata collectiontraffic volumeAnnual Average Daily TrafficOntario Ministry of TransportationLand Registry OfficeProvince of Ontario Land Registration and Information SystemFreedom of Information Actseasonalityvalue of transportationtypes of transportation systemsimportance of highway systemstransportation system development constraintscost of wrong decisionsmonetary costprivate sector costhuman costland expropriationenvironmental costirreversibility cost factortime cost factorpolitical cost factoropportunity costopportunity cost of wrong decisionseconomic cost of wrong decisionseconomic cost of mis-estimationeconomic profit of wrong decisionscost of inactionprice of making right decisionsscope of decisionsrehabilitation decisionland acquisition decisionexpansion decisionuncertainty modelingland acquisition costexpropriation costconstruction costmaterial costMontréal-Mirabel International AirportPickering Airport407 Express Toll RouteHighway 407Master ThesisStatistics