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Irreversible Investment Under Uncertainty: Conservation Easements and the Option to Develop Agricultural Land
Author(s) -
Tegene Abebayehu,
Wiebe Keith,
Kuhn Betsey
Publication year - 1999
Publication title -
journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.157
H-Index - 61
eISSN - 1477-9552
pISSN - 0021-857X
DOI - 10.1111/j.1477-9552.1999.tb00808.x
Subject(s) - easement , valuation (finance) , agricultural land , investment (military) , land tenure , natural resource economics , agriculture , land use , business , government (linguistics) , land values , economics , compensation (psychology) , finance , geography , archaeology , politics , political science , law , psychology , linguistics , philosophy , civil engineering , engineering , psychoanalysis
A landowner's decision to convert farmland to urban use is presented as an irreversible investment under uncertainty. This approach improves on conventional approaches to the valuation of conservation easements by incorporating option values. This approach also refines the calculation of compensation potentially due to landowners when use of their land is restricted by government policies to protect the environment.