Understanding land idling as a strategic behaviour: A real options approach

Khalid, Haniza (2013) Understanding land idling as a strategic behaviour: A real options approach. In: Global Business Research Conference 2013, 7-8 Nov 2013, Kathmandu, Nepal. (Unpublished)

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Abstract

One possible explanation for land idling in a rapidly transforming economy can be found by looking at the value of the option to wait and hysteresis behaviour in the land market. If investors assume that the drop is temporary and that its long term prospects outweigh current holding losses, the market will observe some form of a zone of inactivity i.e., no selling and no additional buying. The fact that landowners elect to keep their valuable land underdeveloped for prolonged periods of time suggests that idled land is more flexible and valuable than what the current market price suggests. If the revenue from farming is insufficient to sustain the activity, land is left idle; although this operational decision is open to continuous revision. The numerical example shown in the paper shows that price of land can be substantially bolstered by the option to wait embedded in land.

Item Type:	Conference or Workshop Item (Full Paper)
Additional Information:	3350/32771
Subjects:	H Social Sciences > HA Statistics > HA154 Statistical data H Social Sciences > HB Economic Theory > HB221 Price H Social Sciences > HD Industries. Land use. Labor > HD101 Land use H Social Sciences > HD Industries. Land use. Labor > HD1401 Agriculture
Kulliyyahs/Centres/Divisions/Institutes (Can select more than one option. Press CONTROL button):	Kulliyyah of Economics and Management Sciences > Department of Economics
Depositing User:	Dr. Haniza Khalid
Date Deposited:	18 Nov 2013 10:09
Last Modified:	18 Nov 2013 10:09
URI:	http://irep.iium.edu.my/id/eprint/32771

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