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Stickiness of rental rates and developers' option exercise strategies
Lai, R.N.1; Wang, K.2,3; Yang, J.3
2007-01
Conference Name6th Cambridge-Maastricht Symposium
Source PublicationJOURNAL OF REAL ESTATE FINANCE AND ECONOMICS
Volume34
Issue1
Pages159–188
Conference DateJUN, 2005
Conference PlaceUniv Cambridge, Madingley Hall, Cambridge, ENGLAND
PublisherSPRINGER
Abstract

In this study we incorporate sticky rents into a real options model to rationalize the widely documented overbuilding puzzle in real estate markets. Given the assumption that developers’ objective function is to maximize total revenue by selecting an optimal occupancy level, our model provides a better explanation of the phenomena we observed in the real world than the traditional market-clearance based real options models. We also show that developers’ exercise strategies can be affected by the size and the type of property markets. In other words, developers’ exercise strategies could differ among markets and under different conditions.

KeywordSticky Rents Overbuilding Real Options
DOIhttp://doi.org/10.1007/s11146-007-9004-3
Indexed BySSCI ; SSCI ; CPCI
Language英语
WOS Research AreaBusiness & Economics ; Urban Studies
WOS SubjectBusiness, Finance ; Economics ; Urban Studies
WOS IDWOS:000246521600007
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Citation statistics
Cited Times [WOS]:8   [WOS Record]     [Related Records in WOS]
Document TypeConference paper
CollectionFaculty of Business Administration
HONOURS COLLEGE
Affiliation1.Department of Finance and Business Economics, Faculty of Business Administration, University of Macau, Taipa, Macau
2.Department of Real Estate, Baruch College (CUNY), New York, NY, United States
3.Department of Finance, California State University-Fullerton, Fullerton, CA, United States
First Author AffilicationFaculty of Business Administration
Recommended Citation
GB/T 7714
Lai, R.N.,Wang, K.,Yang, J.. Stickiness of rental rates and developers' option exercise strategies[C]:SPRINGER,2007:159–188.
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