Document Type

Article

Journal/Book Title/Conference

Economics Research Institute Study Paper

Volume

2

Publisher

Utah State University Department of Economics

Publication Date

1997

First Page

1

Last Page

14

Abstract

The Arrow-Fisher-Henry (AFH) analysis of land development under uncertainty has been conducted in a two-period model in which the decision to develop is indivisible. Recently, this kind of analysis has been extended by Batabyal (1995, 1996a), Capozza and Helsley (1990), and Clarke and Reed (1990) to study the development question in a multiperiod framework. However, very little is known about the nature of the development decision when this decision is divisible. As such, in this paper I study the impact of divisibility on the land development decision over time and under uncertainty. In particular, I characterize the optimal decision rule governing the development of land and show how this rule depends on the stochastic aspects of the underlying problem.


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