Real option valuation of abandoned farmland

Michi Nishihara

Review of Financial Economics, 2012, vol. 21, issue 4, 188-192

Abstract: This paper investigates 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 make a real option valuation of the abandoned farmland taking prospective land conversion into consideration. Results from the model calibration demonstrate that a slight probability of land conversion greatly increases the land value and discourages the owner from cultivating the land. Further, the results show that a small gap in the anticipation of land conversion prevents the owner from selling or leasing the land to a more efficient farmer.

Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1016/j.rfe.2012.07.002

Related works:
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:wly:revfec:v:21:y:2012:i:4:p:188-192

Access Statistics for this article

More articles in Review of Financial Economics from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().