Rural land development under hyperbolic discounting: a real option approach

Luca Di Corato ()

No 2016:8, Working Paper Series from Swedish University of Agricultural Sciences, Department Economics

Abstract: This article presents a simple model of land development under uncertainty and hyperbolic discounting. Land kept in rural use pays an uncertain rent, while net returns from land development are known and constant. The landowner is viewed here as a sequence of infinite autonomous selves with time inconsistent preferences. We solve the underlying noncooperative intra-personal stopping time game under both naïve and sophisticated beliefs about the landowner's time-inconsistency and show that i) land development is accelerated due to his present-biased time preferences and ii) a higher acceleration is associated with sophistication.

Keywords: Land Development; Stochastic Hyperbolic Discounting; Timing Game; Real Options (search for similar items in EconPapers)
JEL-codes: C61 Q15 R11 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2016-08-29
New Economics Papers: this item is included in nep-agr
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://pub.epsilon.slu.se/13609/11/dicorato_l_160915.pdf (application/pdf)

Related works:
Journal Article: Rural land development under hyperbolic discounting: a real option approach (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:slueko:2016_008

Access Statistics for this paper

More papers in Working Paper Series from Swedish University of Agricultural Sciences, Department Economics Department of Economics, Box 7013, Swedish University of Agricultural Sciences, SE-750 07 Uppsala, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Elizabeth Hillerius ( this e-mail address is bad, please contact ).