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Optimal land-for-property real exchange options

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  • Moura, Duarte
  • Pereira, Paulo J.

Abstract

This paper develops a real options framework to analyze land-for-property exchange agreements under uncertainty, focusing on the effects of bargaining power and impatience. We show that while bargaining power reallocates value without altering investment timing, impatience leads to earlier investment and destroys surplus, affecting only the impatient party. These findings underscore the importance of incorporating time preferences and negotiation dynamics in the design of incentive-compatible development contracts.

Suggested Citation

  • Moura, Duarte & Pereira, Paulo J., 2025. "Optimal land-for-property real exchange options," Economics Letters, Elsevier, vol. 257(C).
    • Handle: RePEc:eee:ecolet:v:257:y:2025:i:c:s0165176525004914
    DOI: 10.1016/j.econlet.2025.112654
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    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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