Real options and game theoretical approaches to real estate development projects: multiple equilibria and the implications of different tie-breaking rules

This paper contributes to a fast growing literature which introduces game theory in the analysis of real option investments in a competitive setting. Specifically, in this paper we focus on the issue of multiple equilibria and on the implications that different equilibrium selections may have for the pricing of real options and for subsequent strategic decisions. We present some theoretical results of the necessary conditions to have multiple equilibria and we show under which conditions different tie-breaking rules result in different economic decisions. We then present a numerical exercise using the in formation set obtained on a real estate development in South London. We find that risk aversion reduces option value and this reduction decreases marginally as negative externalities decrease.

Delivering sustainability therapy in Sustainable Development projects

This paper explores the apparent contradiction between the 'linearity' of most Sustainable Development projects, with time-bound and defined outputs achieved at a fixed cost, and an implied 'circularity' of the theory whereby there is no 'end'. Projects usually have clear parameters within which they are implemented, and the inclusion of elements such as the need for accountability, measurable impact and,value for money' have grown in importance. It could be argued that we live in a 'projectified' and therefore linear world. The paper explores the potential contradiction between 'linearity' and 'circularity', and suggests that one way around this is to frame the project within a form of the Kolb Learning Cycle heuristic. This will facilitate a rationalisation from those implementing the sustainable development project as to why decisions are being made and for whom. If these questions are opened up to the project stakeholders, including beneficiaries, then the Kolb cycle could encourage learning and understanding by all involved. It could also provide Sustainability Therapy to those trapped in processes, which they find orthogonal to their own perceptions. It is suggested that such learning, therapy and reflective practice should be a valid output of the sustainable development project, although typically the focus is only upon the final outputs and how they feed into policy. Ironically funders would be well advised to take a broader perspective in order to achieve true 'value for money' within such projects, even if learning is not an easily measurable or tangible outcome. These points are explored within the context of the wider literature and experience with a sustainable development project undertaken in Malta. (c) 2005 Elsevier Ltd. All rights reserved.

Story telling in sustainable development projects

This paper constitutes an attempt to find a means to represent multiple stories in the strong narrative of conventional sustainable development (SD) projects. The authors' experience of such projects in various parts of the world indicates that they have a tendency to arise from and reflect a dominant mindset, placing the SD project in what can be a working environment that is inimical to the very ideals that SD is supposed to represent. Short-termism and value for money drive project formats and objectives, whilst counter-narratives and alternative stories arising from stakeholders in such projects are often ignored. Yet these alternative threads often contain strong SD messages of their own and could, if effectively utilized, enhance the SD project process. This paper sets out the case for a new field - 'project ethnography' - allied with the growing use of meta-analysis to compare project 'stories'. The analytical model applied to compare projects is based on the Kolb learning cycle and involves a (3 X 4)-fold questioning of project conceptual ization and roll-out. Copyright @ 2oo6 John Wiley & Sons, Ltd and ERP Environment.

Problem structuring methods: theorizing the benefits of deconstructing sustainable development projects

Problem structuring methods or PSMs are widely applied across a range of variable but generally small-scale organizational contexts. However, it has been argued that they are seen and experienced less often in areas of wide ranging and highly complex human activity-specifically those relating to sustainability, environment, democracy and conflict (or SEDC). In an attempt to plan, track and influence human activity in SEDC contexts, the authors in this paper make the theoretical case for a PSM, derived from various existing approaches. They show how it could make a contribution in a specific practical context-within sustainable coastal development projects around the Mediterranean which have utilized systemic and prospective sustainability analysis or, as it is now known, Imagine. The latter is itself a PSM but one which is 'bounded' within the limits of the project to help deliver the required 'deliverables' set out in the project blueprint. The authors argue that sustainable development projects would benefit from a deconstruction of process by those engaged in the project and suggest one approach that could be taken-a breakout from a project-bounded PSM to an analysis that embraces the project itself. The paper begins with an introduction to the sustainable development context and literature and then goes on to illustrate the issues by grounding the debate within a set of projects facilitated by Blue Plan for Mediterranean coastal zones. The paper goes on to show how the analytical framework could be applied and what insights might be generated.

Making development simple. The genetic deterministic hypothesis for economic development

This paper discusses the dangers inherent in allempting to simplify something as complex as development. It does this by exploring the Lynn and Vanhanen theory of deterministic development which asserts that varying levels of economic development seen between countries can be explained by differences in 'national intelligence' (national IQ). Assuming that intelligence is genetically determined, and as different races have been shown to have different IQ, then they argue that economic development (measured as GDP/capita) is largely a function of race and interventions to address imbalances can only have a limited impact. The paper presents the Lynne and Vanhanen case and critically discusses the data and analyses (linear regression) upon which it is based. It also extends the cause-effect basis of Lynne and Vanhanen's theory for economic development into human development by using the Human Development Index (HDI). It is argued that while there is nothing mathematically incorrect with their calculations, there are concerns over the data they employ. Even more fundamentally it is argued that statistically significant correlations between the various components of the HDI and national IQ can occur via a host of cause-effect pathways, and hence the genetic determinism theory is far from proven. The paper ends by discussing the dangers involved in the use of over-simplistic measures of development as a means of exploring cause-effect relationships. While the creators of development indices such as the HDI have good intentions, simplistic indices can encourage simplistic explanations of under-development. (c) 2005 Elsevier B.V. All rights reserved.

Small-scale mining, poverty and economic development in sub-Saharan Africa: An overview

Artisanal and small-scale mining (ASM)-low tech, labour intensive mineral processing and excavation activity-is an economic mainstay in rural sub-Saharan Africa, providing direct employment to over two million people. This paper introduces a special issue on 'Small-scale mining, poverty and development in sub-Saharan Africa'. It focuses on the core conceptual issues covered in the literature, and the policy implications of the findings reported in the papers in this special issue. (C) 2009 Elsevier Ltd. All rights reserved.

Evaluating the role of environmental quality in the sustainable rural economic development of England

The issue of the sustainable development of rural economies in England has recently received considerable attention. This is because many of the poorest areas in the country are rural, often of high environmental quality, but suffering from high unemployment and a lack of services and facilities. The rapid decline in agricultural incomes and in-migration of affluent urban workers since 1990 has exacerbated economic inequality in such areas. A number of factors have the potential to drive rural development and this paper applies, and considers, the feasibility of a method from the USA for combining economic and environmental variables in a regional growth model to examine the hypothesis that environmental quality is an important determinant of sustainable rural development in England. The model output suggests that, although environmental quality does play a role in sustainable rural development in England there are other, more important, factors driving development. These include business and communications infra-structure, the degree and opportunities for commuting and underlying employment prospects. The robustness and limitations of the method for combining economic and environmental variables is discussed in relation to the spatial interrelatedness of Local Authority Districts in England, and conclusions are drawn about areas for refinement and improvement of the method.

De-agrarianization, re-agrarianization and local economic development: re-orientating livelihoods in African artisanal mining communities

This article contributes to the debate on livelihood diversification in rural sub-Saharan Africa, focusing specifically on the growing economic importance of artisanal and small-scale mining (ASM) in the region. The precipitous decline in the value of many export crops and the removal of subsidies on crucial inputs such as fertilizers have made smallholder production unviable, forcing many farmers to ‘branch out’ into non-farm activities to supplement their incomes. One of the more popular destinations for poor farmers is the low-tech ASM sector which, because of its low barriers to entry, has absorbed millions of rural Africans over the past two decades, the majority of whom are engaged in the extraction of near-surface mineral deposits located on concessions that have been demarcated to multinational corporations. The efforts made hitherto to control this illegal mining activity, both through force and regulation, however, have had little effect, forcing many of the region’s governments and private sector partners to ‘re-think’ their approaches. One strategy that has gained considerable attention throughout the region is intensified support for agrarian-orientated activities, many of which, despite the problems plaguing smallholder agricultural sector and challenges with making it more economically sustainable, are being lauded as appropriate ‘alternative’ sources of employment to artisanal mining. After examining where artisanal mining fits into the de-agrarianization ‘puzzle’ in sub-Saharan Africa, the article critiques the efficacy of ‘re-agrarianization’ as a strategy for addressing the region’s illegal mining problem. A case study of Ghana is used to shed further light on these issues.

Real option pricing in mixed-use development projects

The application of real options theory to commercial real estate has developed rapidly during the last 15 Years. In particular, several pricing models have been applied to value real options embedded in development projects. In this study we use a case study of a mixed use development scheme and identify the major implied and explicit real options available to the developer. We offer the perspective of a real market application by exploring different binomial models and the associated methods of estimating the crucial parameter of volatility. We include simple binomial lattices, quadranomial lattices and demonstrate the sensitivity of the results to the choice of inputs and method.