Heterogenous Expectations and Farmland Prices

Keith C. Brown

21 citations0/0 files storedAmerican Journal of Agricultural Economics

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Agricultural economics and policies Land Rights and Reforms Agricultural Economics and Policy

Abstract

Abstract This paper examines the effect of heterogenous expectations about the future among potential farmland buyers. It is optimal for each seller to have a reservation price in excess of the value he attaches to the future stream of income attributable to owning the land if he thinks that some potential buyers may be more optimistic than he. A formula for the optimal reservation price is presented, and a numerical illustration is shown. An extremely preliminary empirical test using Corn Belt and Lake State data is made of the importance of optimists in determining land prices for 1968–81.

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References

1977RISK, UNCERTAINTY, AND DIVERGENCE OF OPINION 1978Speculative Investor Behavior in a Stock Market with Heterogeneous Expectations 1979Capital Gains versus Current Income in the Farming Sector 1979The Economics of Asset Values and Current Income in Farming 1979Financial Impacts of Government Support Price Programs 1976Impact of Farm Size on the Bidding Potential for Agricultural Land

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