Land use change is a phenomenon that includes exchanging a physical commodity (land) through a set of agreed mechanisms (land markets). Both the physical land and the markets play a role in forming an individual’s economic decision to exchange a piece of land. Despite such fact, economic theories have not equally considered both physical outputs and procedures (Screpanti & Zamagni, 2005).

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Traditional economic theories initially ignored procedures; they hypothesised that an individual is a rational being that seeks maximum physical benefit (Screpanti & Zamagni, 2005). This quantitative benefit is conceptualised as utility (Emil Kauder, 1965) – I label it as ‘output utility’. Output utility was limited to material benefit in its early conceptualisation, but it extended to procedures due to criticism towards traditional economics (Screpanti & Zamagni, 2005). However, it only considered procedures through risk premium and information cost values (Pratt & Grabowski, 2014). These are quantitative prices that discard the procedural experience and subjective fairness that is embedded in a land. Such experiences may not be relevant in contexts with relatively similar land markets (e.g. Buitelaar, 2007), but they are critical in the formal-informal contexts of the Global South.

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Accordingly, this research aims to identify the effect preferences towards land market procedures on land choices. It showcases such effect through land use Agent Based Models (ABMs). This poses a challenge as land use ABMs commonly apply output utility. Hence, there is a need to formulate a theoretical approach that conceptualises market preferences to allow for (1) empirically observing them in quantitative terms; and (2) incorporating them in ABMs applying output utility approaches.

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This research proposes using procedural utility to capture market preferences. Procedural utility is concerned with the process of reaching an economic goal (Frey et al., 2004). It ties its achievement to the satisfaction of three innate needs: (1) autonomy (being causal); (2) relatedness (being a member of a larger group); (3) competence (being effective) (Frey, 2008). Such innate needs are quantitatively observable through four motivational categories existing on a continuum scale: (1) extrinsic (material benefit); (2) introjected (avoid guilt); (3) identified (alignment with one’s moral values); and (4) integrated (enjoyment of the process) (Ryan & Connell, 1989). Each underlying reason for using a land market should align with one of the aforementioned motivations. By scaling each from 0 to 4, market preferences can be aggregated to a quantitative procedural utility value that can be compared to output utility.

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Thereby, this research formulates an exploratory ABM incorporating procedural and output utility. The model includes two markets types differently preferred by agents (see Figure 1). Agents age, and they relocate to a plot within their neighbourhood while considering a weight-controlled procedural utility. The ABM’s output is tested by considering satisfaction (agent being in its preferred market) and the net-growth (net number of agents occupying plots). The results indicate that higher procedural utility weights lead to (1) higher satisfaction despite having agents randomly search for plots and (2) higher net-growth due to more successful relocations.