Hydrologic and economic uncertainties and flood-risk project design

Hydrologic, hydraulic, and economic uncertainties impact the economic attra ctiveness of flood-risk management projects. In particular, uncertainty in the calculation of expected annual damages introduces uncertainty into econ omic evaluations. This study develops a hypothetical basin to explore the p erformance of designs identified by different economic-risk decision models . A new decision model includes an explicit quantification of uncertainty i n the marginal net benefits and hence in the reliability of net benefits ge nerated by the last increment of a project. Monte Carlo analyses show that the uncertainty in total project benefits may not reveal large uncertaintie s associated with the last increments of a project. In terms of economic pe rformance of the different descriptions of hydrologic risk, expected probab ility and traditional maximum likelihood flood-risk estimators are roughly equivalent. The new decision model identified less costly projects that ach ieved nearly the same average net benefits and had a greater probability of recovering the last dollar spent.