{"title":"可预测增长下的不可逆投资:住房需求旺盛时,土地为何一直空置?","authors":"Rutger-Jan Lange , Coen N. Teulings","doi":"10.1016/j.jet.2023.105776","DOIUrl":null,"url":null,"abstract":"<div><p>The standard model of irreversible investment under uncertainty considers only the level of the cash flow that could be obtained through the investment. We present a general model that includes as state variables both the level and the growth rate of the cash flow, while the timing and size of the one-time investment are discretionary. As an illustration, we consider an investor with the exclusive right to develop a vacant piece of land, where the timing of the investment and the scale of the property are chosen optimally. We demonstrate that construction is optimally postponed when prospects are gloomy, but also when they are bright. Indeed, under sufficiently high growth it is, perversely, never optimal to invest. Under a cost-of-capital argument, the rational response to predictable growth combined with flexible investment conditions is to keep land vacant for extended periods, which may explain why construction in superstar cities often appears sluggish. Our proposed model can be used in all investment decisions, irrespective of sector, where the assumptions of predictable growth and a one-off, flexible but otherwise irreversible investment are met.</p></div>","PeriodicalId":48393,"journal":{"name":"Journal of Economic Theory","volume":null,"pages":null},"PeriodicalIF":1.4000,"publicationDate":"2023-12-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0022053123001722/pdfft?md5=3a16c778fb91ad6bc3b37f619e8f9e27&pid=1-s2.0-S0022053123001722-main.pdf","citationCount":"0","resultStr":"{\"title\":\"Irreversible investment under predictable growth: Why land stays vacant when housing demand is booming\",\"authors\":\"Rutger-Jan Lange , Coen N. Teulings\",\"doi\":\"10.1016/j.jet.2023.105776\",\"DOIUrl\":null,\"url\":null,\"abstract\":\"<div><p>The standard model of irreversible investment under uncertainty considers only the level of the cash flow that could be obtained through the investment. We present a general model that includes as state variables both the level and the growth rate of the cash flow, while the timing and size of the one-time investment are discretionary. As an illustration, we consider an investor with the exclusive right to develop a vacant piece of land, where the timing of the investment and the scale of the property are chosen optimally. We demonstrate that construction is optimally postponed when prospects are gloomy, but also when they are bright. Indeed, under sufficiently high growth it is, perversely, never optimal to invest. Under a cost-of-capital argument, the rational response to predictable growth combined with flexible investment conditions is to keep land vacant for extended periods, which may explain why construction in superstar cities often appears sluggish. Our proposed model can be used in all investment decisions, irrespective of sector, where the assumptions of predictable growth and a one-off, flexible but otherwise irreversible investment are met.</p></div>\",\"PeriodicalId\":48393,\"journal\":{\"name\":\"Journal of Economic Theory\",\"volume\":null,\"pages\":null},\"PeriodicalIF\":1.4000,\"publicationDate\":\"2023-12-14\",\"publicationTypes\":\"Journal Article\",\"fieldsOfStudy\":null,\"isOpenAccess\":false,\"openAccessPdf\":\"https://www.sciencedirect.com/science/article/pii/S0022053123001722/pdfft?md5=3a16c778fb91ad6bc3b37f619e8f9e27&pid=1-s2.0-S0022053123001722-main.pdf\",\"citationCount\":\"0\",\"resultStr\":null,\"platform\":\"Semanticscholar\",\"paperid\":null,\"PeriodicalName\":\"Journal of Economic Theory\",\"FirstCategoryId\":\"96\",\"ListUrlMain\":\"https://www.sciencedirect.com/science/article/pii/S0022053123001722\",\"RegionNum\":3,\"RegionCategory\":\"经济学\",\"ArticlePicture\":[],\"TitleCN\":null,\"AbstractTextCN\":null,\"PMCID\":null,\"EPubDate\":\"\",\"PubModel\":\"\",\"JCR\":\"Q3\",\"JCRName\":\"ECONOMICS\",\"Score\":null,\"Total\":0}","platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Economic Theory","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0022053123001722","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"ECONOMICS","Score":null,"Total":0}
Irreversible investment under predictable growth: Why land stays vacant when housing demand is booming
The standard model of irreversible investment under uncertainty considers only the level of the cash flow that could be obtained through the investment. We present a general model that includes as state variables both the level and the growth rate of the cash flow, while the timing and size of the one-time investment are discretionary. As an illustration, we consider an investor with the exclusive right to develop a vacant piece of land, where the timing of the investment and the scale of the property are chosen optimally. We demonstrate that construction is optimally postponed when prospects are gloomy, but also when they are bright. Indeed, under sufficiently high growth it is, perversely, never optimal to invest. Under a cost-of-capital argument, the rational response to predictable growth combined with flexible investment conditions is to keep land vacant for extended periods, which may explain why construction in superstar cities often appears sluggish. Our proposed model can be used in all investment decisions, irrespective of sector, where the assumptions of predictable growth and a one-off, flexible but otherwise irreversible investment are met.
期刊介绍:
The Journal of Economic Theory publishes original research on economic theory and emphasizes the theoretical analysis of economic models, including the study of related mathematical techniques. JET is the leading journal in economic theory. It is also one of nine core journals in all of economics. Among these journals, the Journal of Economic Theory ranks fourth in impact-adjusted citations.