The Open Urban Studies Journal

2013, 6 : 1-8
Published online 2013 February 8. DOI: 10.2174/1874942901306010001
Publisher ID: TOUSJ-6-1

A New Real Option Value Due to ‘Demographic Risk’ in the Market for Developable Land

Jean Cavailhes , Mohamed Hilal and Pierre Wavresky
UMR 1041 INRA CESAER, 26 Bd Docteur Petitjean, F-21000 Dijon, France.

ABSTRACT

We study two option values in the developable land market in a French department (Nord): the classical option value relating to the short-run volatility of the land price and a long-run option value resulting from uncertainty about demographic change. The findings show that both are significant. First, the land price increases by 7.4–15.3% when the standard deviation (STD) of the land price rises by a STD. Second, an increase of one STD in the STD of the variation in population between 1982 and 1999 entails a 6% increase in the developable land price.

Keywords:

Land market, option values, urban economics.