What are some advanced techniques for cost-benefit analysis?

What are some advanced techniques for cost-benefit analysis?

Advanced cost-benefit analysis techniques include Monte Carlo simulations, sensitivity analysis, and real options analysis.

Can you explain how Monte Carlo simulations work in this context?

Monte Carlo simulations use random sampling to model the probability of different outcomes in a process, helping to assess risk.

What is sensitivity analysis and why is it important?

Sensitivity analysis examines how the variation in output can be attributed to different variations in input, highlighting key factors.

How does real options analysis differ from traditional cost-benefit analysis?

Real options analysis considers the value of flexibility and future decision-making in uncertain environments, unlike traditional methods.

Can you provide an example of when to use these techniques?

These techniques are useful in large projects with significant uncertainty, like infrastructure investments or R&D projects.