Real Options Valuation of Abandoned Farmland

Michi Nishihara ()
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Michi Nishihara: Graduate School of Economics, Osaka University

No 11-09, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: I investigate the decision-making process of an owner of abandoned farmland that is currently restricted to agricultural use but will be available for nonagricultural use in the future. I find that a slight probability of land conversion greatly increases the land value and discourages the owner from cultivating the land. I also observe that a small gap in the anticipation of land conversion prevents the owner from selling or leasing the land to a more efficient farmer.

Keywords: real option; abandoned farmland; land development; land conversion. (search for similar items in EconPapers)
JEL-codes: G13 Q15 R14 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2011-03
New Economics Papers: this item is included in nep-agr
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