Cost-benefit analysis: Dealing with the problems of indivisible projects and fixed budgets

The use of cost-benefit analysis in option appraisals in health care when the decision-maker is faced with indivisible projects and a fixed budget is examined. It is argued that the methods used to overcome the problem of indivisibilities, benefit-cost ratios and the net benefit method, are not suitable for choosing between alternative projects for two reasons. Firstly, the values of benefit-cost ratios are sensitive to the specification of …