Unrealistic optimism in the financing of large infrastructure projects in Europe : results of a survey among private investors, public investors, and lenders

There is a gap in infrastructure financing in Europe. One action that can be taken to close the gap is to optimize public and corporate spending. For this, project risks need to be understood in their full complexity. However, heuristics and cognitive bias can lead decision makers to under- and overvalue risks and rewards. Goal of the survey was to understand the use of cognitive bias in infrastructure project finance in order to find ways to make the risk assessments even more realistic than it is today. A major finding is that unrealistic optimism influences risk assessment in the financing of European infrastructure projects. However, the unrealistic optimism is at least partly situational and not strictly rooted in the head of the decision maker no matter the circumstance. Thus, companies can reduce the unrealistic optimism of the individual with the right institutional structure and team setting.