Sensitivity analysis of a cost-benefit analysis. Lessons for the valuation of food alleviation projects

Abstract

Cost-Benefit Analysis based on the damage avoided approach gives rise to several synthetic indicators measuring either the flood exposure of an area (mean annual damage), or the interest to conduct a flood prevention policy (mean annual damage avoided, net present value). Those indicators are the outcome of a combination of hydrological, hydraulic, geographic and economic models. Although it is recommended to study the precision of these indicators, this is rarely done in practice, as the combined models which are needed are relatively complex. In this article, we present an approach which is based on Monte-Carlo analysis, and discuss the insights which can be drawn from it on the validity of the indicators