Theoretical analysis of a simple permit system for selling synthetic wildlife goods

We present an economic model of a market for wildlife products. We use it to study theoretically the potential impact on the poaching of wildlife animals if a legal market for synthetic wildlife products is created. We show that allowing for a legal trade in synthetic substitutes in general has two opposing effects on poaching level: a price effect that reduces poaching by lowering the revenue generated from poaching; and a laundering effect that encourages poaching by making it easier for poachers to sell their products. When demand for wildlife goods is inelastic, the price effect is bigger, while the laundering effect is smaller; hence, establishing a legal market for synthetic substitutes is more likely to reduce poaching when demand is less sensitive to price changes. Measures that make it more difficult for poachers to launder their products reduce the laundering effect and enhance the conservation value of producing synthetic substitutes.