What Are the Base Case, Pessimistic Case, Expected Case and Optimistic Case?

The base case, pessimistic case, expected case and optimistic case help decision-makers compare alternatives and understand potential outcomes.

The base case defines the reference option, while the pessimistic, expected and optimistic cases describe how an option could perform under different assumptions.

Base Case

The base case is the reference option against which proposed alternatives are compared. Often described as the “do nothing” or business-as-usual option, it shows what is likely to happen if the proposed investment or change does not proceed.

“Do nothing” does not necessarily mean stopping all activity or incurring no costs. It usually means continuing existing operations, including necessary maintenance and essential commitments. Where some intervention is unavoidable, a do-minimum option may be used as the reference instead.

The base case includes the costs, benefits, risks and performance expected over the assessment period, allowing for foreseeable changes such as rising costs, ageing assets or changing demand.

Example: When assessing a new production system, the base case is continuing to operate and maintain the existing equipment without investing in the proposed replacement.

Pessimistic Case

The pessimistic case is a plausible downside scenario showing how an option could perform under less favourable conditions than those assumed in the expected case.

It uses cautious but credible assumptions, such as lower demand, higher costs, implementation delays or reduced benefits. These assumptions should form a combination that could reasonably occur together, rather than represent an absolute worst-case outcome.

Example: For the new production system, the pessimistic case assumes a longer implementation period, higher installation costs and smaller productivity gains.

Expected Case

The expected case is the central scenario used to assess an option’s performance, based on the most reasonable, evidence-supported assumptions about costs, benefits, timing and delivery.

Also called the central case, it provides the main planning estimate. It is not necessarily the mathematical midpoint between low and high outcomes or a probability-weighted average.

Example: For the new production system, the expected case assumes achievable productivity improvements, realistic installation costs and a normal implementation period.

Optimistic Case

The optimistic case is a plausible upside scenario showing how an option could perform under more favourable conditions than those assumed in the expected case.

It uses favourable but credible assumptions, such as stronger productivity, lower costs or earlier benefits. These assumptions should form a combination that could reasonably occur together.

Example: For the new production system, the optimistic case assumes faster implementation and greater productivity gains, while allowing for the costs of supporting higher output.

Using These Terms in Options Analysis

The base case provides the benchmark for comparing alternatives. Each option—including the reference option where relevant—can then be assessed under expected, optimistic and pessimistic scenarios. A pessimistic case, also called a downside scenario, shows performance under less favourable but plausible conditions.

The term “base case” is sometimes also used to mean the expected scenario. Clearly define your terminology to avoid confusing the reference option with the central planning estimate.

Sensitivity analysis complements these scenarios by varying individual assumptions to identify which have the greatest influence on the result.