Time Invariant Decision Rules and Land Development: A Dynamic and Stochastic Analysis
14 Pages Posted: 13 Jun 2003
Date Written: 2003
The Arrow-Fisher-Henry (AFH) analysis of land development under uncertainty has been conducted in a two period model. In contemporary times, Capozza and Helsley (1990), Batabyal (1996, 1997, 2000), and others have analyzed the question of land development under uncertainty in a multi-period setting. We extend aspects of this literature by examining the role that bid values play in the decision to develop land over time and under uncertainty. We first delineate a simple decision rule for a landowner who wishes to obtain, at the very least, a minimal level of revenue from land development. Next, we compute the expected value of the bid that results in land development when this decision rule is followed by the landowner.
Keywords: Bid, Dynamics, Land Development, Reservation Price, Uncertainty
JEL Classification: Q24, R19, D81
Suggested Citation: Suggested Citation