An Optimal Stopping Approach to Land Development Under Uncertainty

The Arrow/Fisher/Henry study of the development of land under uncertainty has been conducted in a two period setting. Recently, Capozza and Helsley (1990) and Batabyal (1996, 1997) have analyzed the problem of the development of land under uncertainty in a multi-period model. In this paper, I extend parts of this literature. First, I use the theory of optimal stopping to study the multi-period land development problem. Next, given that the goal of a landowner is to maximize the total revenue from the development of land, I describe the optimal decision rule governing land development