Indivisibility and Divisibility in Land Development Over Time and Under Uncertainty

17 Pages Posted: 3 Feb 2005

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

Multiple version iconThere are 2 versions of this paper

Date Written: January 2005

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.

Keywords: Divisible, dynamic, indivisible, land development, time constraint, uncertainty

JEL Classification: Q24, R14

Suggested Citation

Batabyal, Amitrajeet A. and Yoo, Seung Jick, Indivisibility and Divisibility in Land Development Over Time and Under Uncertainty (January 2005). Available at SSRN: https://ssrn.com/abstract=653082 or http://dx.doi.org/10.2139/ssrn.653082

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/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
60
Abstract Views
1,112
rank
431,994
PlumX Metrics