This paper specifies a model of urban development under uncertainty when there is a lag between the decision to begin a project and its completion. These lags have three important effects. First, the deterrent effect of uncertainty on development is smaller with lags than without them. Second, in some cases, development occurs later under uncertainty than with certainty. Third, lags may lead to leapfrog development, when distant land is developed prior to nearby land.
Bibliographical noteFunding Information:
* This research was begun while Bar-Ilan was a visitor at the Department of Economics at the University of British Columbia. We thank Kaushik Amin, Jan Brueckner, and two anonymous referees for helpful comments. Strange thanks the Canadian Real Estate Research Bureau, the Real Estate Foundation of British Columbia, and the Social Sciences and Humanities Research Council of Canada for research support. Bar-Ilan is grateful for a Humanities and Social Sciences research grant.
ASJC Scopus subject areas
- Economics and Econometrics
- Urban Studies