A spatial-dynamic approach to land rental markets

• Applicants: Professor Dr. Alfons Balmann; Dr. Marten Graubner
• Subject Area: Agricultural Economics, Agricultural Policy, Agricultural Sociology
• Term: from 2014 to 2018
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 261292479

This project seeks to investigate pricing and competition on land rental markets, with an emphasis on local market power. The importance of land for agricultural production, its relevance for agricultural policy, as well as increased public attention with respect to land prices necessitates our understanding of price formation mechanisms on this market. Due to the specific characteristics of land, we propose a spatial-imperfect competition approach, which may yield new, potentially contradictory results relative to prior work (based on classical price theory). We aim to incorporate different features of the land market as dynamic competition and economies of size, which thus far have not been studied (and which particularly have not been studied together). Because a corresponding theoretical model of spatial competition is analytically intractable, we will complement deductive analysis with approaches from computational economics. We plan to investigate the effects of market structure (e.g., via local competition by farms) and price mechanisms (e.g., different types of auctions versus search markets) on land prices and the distribution of profits. We believe that our results will contribute to a better understanding of the formation of land prices and their dynamics.

• DFG Programme: Research Grants