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The Impact of Information on Land Development: A Dynamic and Stochastic Analysis

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  • Batabyal, Amitrajeet A.

Abstract

In a two-period model, economists such as K.J. Arrow, A.C. Fisher, and C. Henry, have shown that when development is both indivisible and irreversible, a developer who ignores the possibility of obtaining new information about the outcome of such development will invariably underestimate the benefits of preservation and hence favor development. In this note, I extend the AFH analysis in two directions. I model the land development problem in a dynamic framework, explicitly specifying an information production function. In such a setting, I then ask and answer the question concerning when development should take place.

Suggested Citation

  • Batabyal, Amitrajeet A., 1995. "The Impact of Information on Land Development: A Dynamic and Stochastic Analysis," Working Papers 9513, Utah State University, Department of Economics.
  • Handle: RePEc:usu:wpaper:9513
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    References listed on IDEAS

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    1. Kenneth J. Arrow & Anthony C. Fisher, 1974. "Environmental Preservation, Uncertainty, and Irreversibility," The Quarterly Journal of Economics, Oxford University Press, vol. 88(2), pages 312-319.
    2. Epstein, Larry G, 1980. "Decision Making and the Temporal Resolution of Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(2), pages 269-283, June.
    3. Hanemann, W. Michael, 1989. "Information and the concept of option value," Journal of Environmental Economics and Management, Elsevier, vol. 16(1), pages 23-37, January.
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    Cited by:

    1. Batabyal, Amitrajeet A., 1999. "On some aspects of land development when the decision to develop is divisible," Resources Policy, Elsevier, vol. 25(3), pages 173-177, September.
    2. Amitrajeet Batabyal, 1998. "Aspects of Arranged Marriages and the Theory of Markov Decision Processes," Theory and Decision, Springer, vol. 45(3), pages 241-253, December.
    3. Batabyal, Amitrajeet A. & Yoo, Seung Jick, 2004. "Indivisibility And Divisibility In Land Development Decisions Over Time And Under Uncertainty," 2004 Annual meeting, August 1-4, Denver, CO 20278, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

    More about this item

    Keywords

    development; dynamic; information; uncertainty;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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