This thesis studies the costs and benefits of potential flood measures for Jakarta, and it aims to make novel contributions to the economic analysis of flood risk management such that it may assist decision-makers in identifying solutions for effective flood risk reduction. Chapter 2 presents a flood damage assessment by focusing on the residential and the business sector. The assessment is conducted through two steps, specifically by means of surveys and by comparing the survey results with the existing flood damage model in Jakarta for a similar flood event in the same area. Chapter 3 assesses the optimal flood risk reduction strategy that considers the combination of upstream, midstream and downstream measures. To assess the optimal strategy, a stylized economic model based on an economic optimization approach is developed. The objective function of the model is to minimize the present value of the total expected cost of the implementation of the strategy. Chapter 4 analyses the flood risk reduction grants to be allocated within the adjacent regions for the realisation of flood measures. Another stylized economic model is developed, but now its aim is to determine the efficient allocation of flood reduction grants that are given by Jakarta to the adjacent regions. Chapter 5 investigates households’ preferences for relocation from flood-prone areas to vertical housings and estimates the compensation needed. This study has applied focus group discussions and a choice experiment to elicit the preferences of flood vulnerable households with respect to public vertical housing as a flood risk reduction measure in Jakarta.