This doesn’t sound right to me. Let’s take a very simplified situation.
Imagine there are several identical places where I’m considering buying a bunch of land and then building transit there to make it more valuable.
The value of land if this option were removed is V1
The value of land after I build transit to it is V2
I get all the land owners together and we have an auction, where I offer to buy from whichever owner gives me the best price, wouldn’t you expect to end up with a price much closer to V1 than V2?
In a real scenario properties wouldn’t be identical which makes an auction a poor fit and it wouldn’t look exactly like this, but it doesn’t seem that far off?
Now, you might say that V1 is actually quite high, nearly or exactly as high as V2 because these land owners could sell to someone else who also has a “buy land, build transit” approach. Then I agree there’s no profit, but that’s a standard result in economics: under perfect competition economic profits are zero.
This doesn’t sound right to me. Let’s take a very simplified situation.
Imagine there are several identical places where I’m considering buying a bunch of land and then building transit there to make it more valuable.
The value of land if this option were removed is V1
The value of land after I build transit to it is V2
I get all the land owners together and we have an auction, where I offer to buy from whichever owner gives me the best price, wouldn’t you expect to end up with a price much closer to V1 than V2?
In a real scenario properties wouldn’t be identical which makes an auction a poor fit and it wouldn’t look exactly like this, but it doesn’t seem that far off?
Now, you might say that V1 is actually quite high, nearly or exactly as high as V2 because these land owners could sell to someone else who also has a “buy land, build transit” approach. Then I agree there’s no profit, but that’s a standard result in economics: under perfect competition economic profits are zero.
You get back to the point of projects being mutually exclusive. Can you elaborate in your example on why the projects would be exclusive?
In the scenario I’m imagining, the builder has capacity constraints (limited capital, organizational scalability)