Optimal conservation, extinction debt, and the augmented quasi-option value

Anke Leroux, Vance Martin, Timo Goeschl

Research output: Contribution to journalArticleResearchpeer-review

29 Citations (Scopus)

Abstract

Optimal conversion defines rules that determine the rate at which land is irreversibly moved out of conservation into production. What are the implications on these rules of allowing for a feedback between conversion decisions and the stochasticity of conservation benefits? We address this question using the well-known ecological mechanism of extinction debt as an illustration. This yields a model with a controlled-diffusion process at its core. We solve this model using a real-options approach, which leads to the conventional conversion rule as a special case. Calibrating the model to a specific case (Costa Rica), we demonstrate the presence of an augmented quasi-option value. The size of this value depends on the strength of the feedback.
Original languageEnglish
Pages (from-to)43 - 57
Number of pages15
JournalJournal of Environmental Economics and Management
Volume58
Issue number1
DOIs
Publication statusPublished - 2009
Externally publishedYes

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