Optimal land-for-property real exchange options

Duarte Moura and Paulo J. Pereira

Economics Letters, 2025, vol. 257, issue C

Abstract: This paper develops a real options framework to analyze land-for-property exchange agreements under uncertainty, focusing on the effects of bargaining power and impatience. We show that while bargaining power reallocates value without altering investment timing, impatience leads to earlier investment and destroys surplus, affecting only the impatient party. These findings underscore the importance of incorporating time preferences and negotiation dynamics in the design of incentive-compatible development contracts.

Keywords: Land-for-property exchange; Real estate; Real options; Bargaining game; Impatient agents (search for similar items in EconPapers)
JEL-codes: D23 D74 G13 R30 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:257:y:2025:i:c:s0165176525004914

DOI: 10.1016/j.econlet.2025.112654

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