class assignment on shadow pricing.

1. Project management is like juggling three
balls- time, cost and quality.
Program management is like a troupe of circus
performers standing in a circle, each juggling
three balls and swapping balls from time to
time.
- G. Reiss

2. SHADOW PRICING IN PROJECT
MANAGEMENT
A tool used in Project Appraisal

3. TABLE OF CONTENTS
• Introduction
• Why only in
developing countries?
• Factors affecting
shadow pricing
• Basic issue of shadow
pricing
• Benefits of shadow
pricing
• Limitations of shadow
pricing
• Conclusion

4. Project
Cost benefit
analysis
Capital
budgeting
technique
Financial
analysis
Project
appraisal
Shadow
pricing

5. INTRODUCTION
• Measures social cost benefit
• Mostly used in developing countries
• Developing countries- China, India,
Nepal, Pakistan & Sri Lanka
• Proxy value of a good

6. WHY ONLY IN DEVELOPING
COUNTRIES?
• Price determination in imperfect competition
• Underemployment at existing wage rate
• Exists deficiency of fund at existing rate
• Foreign exchange at prevailing exchange
rate

7. FACTORS AFFECTING SHADOW PRICING
• Rationing of commodity
• Minimum wages
• Foreign exchange restriction

8. BASIC ISSUES OF SHADOW
PRICING
• Choice of nume’raire
• Concept of tradability
• Sources of shadow price
• Taxes
• Consumer willingness to pay

9. BENEFITS OF SHADOW PRICING
• Best and convenient tool
• Optimal allocation of resources
• Considers economic opportunity cost
• Avoids underpricing

10. LIMITATIONS OF SHADOW PRICING
• Based on assumptions
• No universality
• Non-availability of adequate
and reliable data
• A static and timeless
concept
• Indeterminable concept
• Biasness based on response and sample
• Failure to reflect long run social opportunity
cost

11. CONCLUSION
• Social cost-benefit analysis
• Used in developing countries
• Basic issues of tradability and source of
shadow price
• Convenient tool for project
• Considers economic opportunity cost
• Based on assumption
• Lack of adequate reliable data

12. THANK YOU FOR THE PATIENCE.
The Team
Anup Kujur
Bijesh Timilsina
Koshica Tamang
Nikesh Maharjan
Reetu Gochhen