Bid Values and Their Role in Land Development Over Time and Under Uncertainty

Studies in Regional Science, Vol. 33, No. 1, pp. 229-236, 2003

Posted: 13 Feb 2004

See all articles by Amitrajeet A. Batabyal

Amitrajeet A. Batabyal

Rochester Institute of Technology (RIT) - Department of Economics

Seung Jick Yoo

Korea Energy Economics Institute

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Abstract

Recently, Batabyal (2000) has demonstrated that when the land development question is studied in an intertemporal and random setting, it is possible that a landowner will never develop (always preserve) his or her land. This result arises because the landowner in Batabyal (2000) maximizes the likelihood of accepting the best possible bid of development. What happens when a landowner employs the following decision rule: Develop land as long as the dollar value of a bid exceeds a stochastic reservation level of revenue? In this paper, we provide an interesting answer to this question. First, we establish that the likelihood of developing land with this decision rule is always positive. Even so, we point out that on average, a landowner who uses this decision rule will always end up preserving his or her land.

Keywords: Decision Rule, Dynamics, Land Development, Preservation

JEL Classification: Q24, D81

Suggested Citation

Batabyal, Amitrajeet A. and Yoo, Seung Jick, Bid Values and Their Role in Land Development Over Time and Under Uncertainty. Studies in Regional Science, Vol. 33, No. 1, pp. 229-236, 2003, Available at SSRN: https://ssrn.com/abstract=500162

Amitrajeet A. Batabyal (Contact Author)

Rochester Institute of Technology (RIT) - Department of Economics ( email )

92 Lomb Memorial Drive
Rochester, NY 14623-5604
United States
585-475-2805 (Phone)
585-475-5777 (Fax)

HOME PAGE: http://people.rit.edu/aabgsh

Seung Jick Yoo

Korea Energy Economics Institute ( email )

665-1 Naeson2-dong
Euiwang-si
Kyunggi-Do 437-082
Korea

HOME PAGE: http://www.rit.edu/~aabgsh/

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