Endogenizing the Reservation Value in Models of Land Development Over Time and Under Uncertainty

Amitrajeet Batabyal and Basudeb Biswas ()

ERSA conference papers from European Regional Science Association

Abstract: The notion of a reservation value is a key feature of most contemporary dynamic and stochastic models of land development. It is clear that the magnitude of the reservation value has a fundamental bearing on the decision to develop or preserve land. This notwithstanding, many papers that analyze land development in a dynamic and stochastic setting treat a landownerÂ’s reservation value as an exogenous variable. Therefore, the purpose of this paper is to endogenize the reservation value in the context of a model of land development over time and under uncertainty. Our analysis shows that the optimal reservation value is the solution to a specific maximization problem. In addition, we also show that there exist theoretical circumstances in which the optimal reservation value is unique.

Date: 2005-08
New Economics Papers: this item is included in nep-geo
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https://www-sre.wu.ac.at/ersa/ersaconfs/ersa05/papers/163.pdf (application/pdf)

Related works:
Working Paper: ENDOGENIZING THE RESERVATION VALUE IN MODELS OF LAND DEVELOPMENT OVER TIME AND UNDER UNCERTAINTY (2004)
Working Paper: Endogenizing the Reservation Value in Models of Land Development Over Time and Under Uncertainty (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:wiw:wiwrsa:ersa05p163

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