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Decision Analysis for Utilizing Hazardous Waste Site Assessments in Real Estate Acquisition

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  • Frank Noonan
  • Charles A. Vidich

Abstract

When a buyer needs to purchase commercial or industrial property, the decision of what real estate to purchase should be based on an assessment of the total costs of acquisition. In addition to the direct purchase cost, other possible costs include hazardous waste site assessment studies and clean up costs if the purchased site proves to be contaminated. This paper presents a decision analysis model for determining when and which type of hazardous waste assessment tests should be conducted and how the test output affects the choice of site. The model assumes there are two types of hazardous waste assessment, an historical use review (phase 1 test)and soil and water sampling (phase 2 test). Model inputs include the cost, sensitivity and specificity for each type of test, a site's purchase price, and a priori probability of contamination, along with the clean‐up cost for a contaminated site. The analysis uses the results of a data survey of 17 environmental engineering firms in setting values on the model input requirements. The paper also reports on sensitivity analysis with the model for the purpose of providing decision‐makers with explicit protocols for test utilization.

Suggested Citation

  • Frank Noonan & Charles A. Vidich, 1992. "Decision Analysis for Utilizing Hazardous Waste Site Assessments in Real Estate Acquisition," Risk Analysis, John Wiley & Sons, vol. 12(2), pages 245-251, June.
    • Handle: RePEc:wly:riskan:v:12:y:1992:i:2:p:245-251
    DOI: 10.1111/j.1539-6924.1992.tb00672.x
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    References listed on IDEAS

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    1. John C. Hershey & Randall D. Cebul & Sankey V. Williams, 1986. "Clinical Guidelines for Using Two Dichotomous Tests," Medical Decision Making, , vol. 6(2), pages 68-78, June.
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    Cited by:

    1. Hilary Sigman, 2010. "Environmental Liability and Redevelopment of Old Industrial Land," Journal of Law and Economics, University of Chicago Press, vol. 53(2), pages 289-306, May.
    2. Anna Alberini & Dennis Guignet, 2008. "Voluntary Cleanups and Redevelopment Potential: Lessons from Baltimore, Maryland," Working Papers 2008.87, Fondazione Eni Enrico Mattei.
    3. Donald L. Keefer & Craig W. Kirkwood & James L. Corner, 2004. "Perspective on Decision Analysis Applications, 1990–2001," Decision Analysis, INFORMS, vol. 1(1), pages 4-22, March.
    4. Jan Holmberg & Urho Pulkkinen & Kurt Pörn & Kecheng Shen, 1994. "Risk Decision Making in Operational Safety Management– Experience from the Nordic Benchmark Study," Risk Analysis, John Wiley & Sons, vol. 14(6), pages 983-991, December.
    5. Vicki Bier, 2020. "The Role of Decision Analysis in Risk Analysis: A Retrospective," Risk Analysis, John Wiley & Sons, vol. 40(S1), pages 2207-2217, November.

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