A new real option value due to "demographic risk" in the market for developable land

Jean Cavailhès (1) , Mohamed Hilal (1) , Pierre Wavresky (1)

1 CESAER - Centre d'Economie et de Sociologie Rurales Appliquées à l'Agriculture et aux Espaces Ruraux

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.

Mots clés: Land market; Option values; Urban economics

Domaines: Economies et finances; Géographie

Jean Cavailhès, Mohamed Hilal, Pierre Wavresky. A new real option value due to "demographic risk" in the market for developable land. Open Urban Studies Journal, 2013, 6, pp.1-8. ⟨10.2174/1874942901306010001⟩. ⟨hal-00939785⟩