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Indivisibility And Divisibility In Land Development Decisions Over Time And Under Uncertainty

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  • Batabyal, Amitrajeet A.
  • Yoo, Seung Jick

Abstract

The quasi-option value (QOV) literature originated by Arrow and Fisher (1974) and by Henry (1974) is largely concerned with the analysis of two-period models of land development. Our paper extends this literature by analyzing two scenarios in which the decision to develop land is made in a multi-period and stochastic framework. In the first scenario, the development decision is indivisible. In contrast, in the second scenario, the development decision is divisible. Specifically, we study the properties of the indivisible development decision when there is a time constraint on when land is to be developed. We then analyze the ways in which the divisible land development decision depends on the extent of a landowner's landholding and on the number of development opportunities awaiting this landowner.

Suggested Citation

  • Batabyal, Amitrajeet A. & Yoo, Seung Jick, 2004. "Indivisibility And Divisibility In Land Development Decisions Over Time And Under Uncertainty," 2004 Annual meeting, August 1-4, Denver, CO 20278, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea04:20278
    DOI: 10.22004/ag.econ.20278
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    References listed on IDEAS

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    1. Claude Henry, 1974. "Option Values in the Economics of Irreplaceable Assets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 89-104.
    2. Batabyal, Amitrajeet A., 1999. "On some aspects of land development when the decision to develop is divisible," Resources Policy, Elsevier, vol. 25(3), pages 173-177, September.
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