Abstract
A reliable, cost‐effective and safe transportation system is essential to economic growth. To keep pace with demands for network capacity, revenue‐generating projects are increasingly being used to complement the current procurement practices and lessen the pressure on public finances. In such transportation networks where there exists a mix of free access links and links with user fees, network interconnectivity is an important component of project valuation. A bilevel stochastic recourse model for valuating network flexibility is formulated. A key component of the model is consideration of network‐based managerial flexibility in context of the upper level project valuation objective and the lower level network user equilibrium solution under demand uncertainty. The results from a test network, for which a closed form solution is possible, indicate that the value of network flexibility directly depends on initial network conditions, variance in future travel demand and toll pricing decisions.