Probabilistic Approach for Long-Run Price Projections: Case Study of Concrete and Asphalt
Publication: Journal of Construction Engineering and Management
Volume 143, Issue 1
Abstract
Practitioners increasingly use pavement management systems for determining the allocation of resources for multidecade investments. One important and uncertain input that will affect decisions in these frameworks is future changes in cost for rehabilitation and reconstruction actions. Despite this, existing paradigms overlook its consideration largely because little research to date has evaluated the performance of forecasting over extended time horizons. Therefore, the contribution of this study is the demonstration (via a case study) of the long-term fidelity of probabilistic price projections relative to current practice. Two paving materials, asphalt and concrete, are projected through a probabilistic hybrid forecasting model that convolves conventional forecasts for underlying constituent prices and a long-term price equilibrium relationship between commodities. Out-of-sample forecasts are conducted to test the performance of the proposed model in estimating future prices in terms of their (1) expectation and (2) prediction interval. Results indicate that the hybrid model performs similarly to current practice in terms of expectation while, and perhaps more importantly, providing theoretical uncertainty bounds that matched well with future volatility. The latter result suggests the probabilistic forecasting models developed could potentially augment current pavement management tools, allowing decision-makers to make more informed allocation choices.
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Acknowledgments
This research was carried out as part of the Concrete Sustainability Hub at Massachusetts Institute of Technology (MIT), supported by the Portland Cement Association (PCA) and Ready Mixed Concrete (RMC) Research and Education Foundation.
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© 2016 American Society of Civil Engineers.
History
Received: Aug 12, 2015
Accepted: Jun 10, 2016
Published online: Jul 20, 2016
Discussion open until: Dec 20, 2016
Published in print: Jan 1, 2017
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