Interdependence Effects of Housing Abandonment and Renovation

Tammie Simmons-Mosley

Journal of Real Estate Research, 2003, vol. 25, issue 4, 421-430

Abstract: This study uses a methodology for analyzing the interdependence effects of abandonment and renovation for profit-maximizing landlords. After using a Prisoners' Dilemma game of abandonment to establish the existence of the interdependence phenomenon between internal rates of return, a Stackelberg framework is employed to model the interdependence effects of abandonment and renovation. The Stackelberg model appropriately defines the timing payoffs of the landlords' operational decisions. This model shows that as long as one landlord does not abandon, the optimal decision for the other landlord is to renovate their property.

Date: 2003
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DOI: 10.1080/10835547.2003.12091122

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