IDEAS home Printed from https://ideas.repec.org/a/wly/canjec/v33y2000i2p413-434.html
   My bibliography  Save this article

On estimating the option value of preserving a wilderness area

Author

Listed:
  • Margaret Forsyth

Abstract

In this paper option pricing theory is used to analyse whether or not to preserve a wilderness area. A numerical approach is demonstrated that can be applied to any generalized stochastic process. The impact of assuming that amenity value follows a logistic process, rather than geometric Brownian motion, is considered. The calculation of critical levels for amenity value necessary to justify preserving a wilderness area such as the Killarney Provincial Park in Ontario or the Headwaters Forest in California is demonstrated. The impact of changing the assumed growth and volatility of amenity value is also examined. JEL Classifcation: D81 Q26 Ce mémoire utilise la théorie de la tarification d'une option pour analyser si on doit préserver un espace naturel. On utilise une approche numérique qui peut être appliquée à tout processus stochastique généralisé. On examine l'impact de possibilités que le profil de la valeur de la ressource dans la temps suive un processus logistique plutôt qu'un pattern géométrique de type Brownien. Le texte montre le calcul des niveaux critiques de la valeur de la ressource qui seraient nécessaires pour justifier la préservation d'une espace naturel comme le parc provincial Killarney en Ontario ou les forêts Headwaters en Californie. L'impact de postulats différents quant à la croissance et à la volatilité de la valeur de la ressource est examiné.

Suggested Citation

  • Margaret Forsyth, 2000. "On estimating the option value of preserving a wilderness area," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 33(2), pages 413-434, May.
    • Handle: RePEc:wly:canjec:v:33:y:2000:i:2:p:413-434
    DOI: 10.1111/0008-4085.00022
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/0008-4085.00022
    Download Restriction: no
    File URL: https://libkey.io/10.1111/0008-4085.00022?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Isik, Murat & Khanna, Madhu & Winter-Nelson, Alex, 2001. "Sequential Investment In Site-Specific Crop Management Under Output Price Uncertainty," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(1), pages 1-18, July.
    2. Jonathan Buttle & Daniel Rondeau, 2004. "An incremental analysis of the value of expanding a wilderness area," Canadian Journal of Economics, Canadian Economics Association, vol. 37(1), pages 189-198, February.
    3. King, Steven & Fraser, Iain, 2013. "Divestment of the English Forestry Estate: An economically sound choice?," Ecological Economics, Elsevier, vol. 88(C), pages 25-31.
    4. Sims, Charles & Finnoff, David, 2012. "The role of spatial scale in the timing of uncertain environmental policy," Journal of Economic Dynamics and Control, Elsevier, vol. 36(3), pages 369-382.
    5. Insley, Margaret, 2002. "A Real Options Approach to the Valuation of a Forestry Investment," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 471-492, November.
    6. Davis, Rebecca J. & Sims, Charles, 2016. "To Frack or Not to Frack: Option Value Analysis on the U.S. Natural Gas Market," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235642, Agricultural and Applied Economics Association.
    7. Isik, Murat & Yang, Wanhong, 2004. "An Analysis of the Effects of Uncertainty and Irreversibility on Farmer Participation in the Conservation Reserve Program," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(2), pages 1-18, August.
    8. Delang, Claudio O., 2006. "Not just minor forest products: The economic rationale for the consumption of wild food plants by subsistence farmers," Ecological Economics, Elsevier, vol. 59(1), pages 64-73, August.
    9. Murat Isik, 2006. "Implications of alternative stochastic processes for investment in agricultural technologies," Applied Economics Letters, Taylor & Francis Journals, vol. 13(1), pages 21-27.
    10. Yang, Wanhong & Isik, Murat, 2003. "Integrating Farmer Decision-Making to Target Land Retirement Programs," 2003 Annual meeting, July 27-30, Montreal, Canada 22062, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    11. Erling Røed Larsen, 2002. "The Political Economy of Global Warming. From Data to Decisions," Discussion Papers 322, Statistics Norway, Research Department.
    12. Patrick Lloyd‐Smith, 2021. "The economic benefits of recreation in Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(4), pages 1684-1715, November.
    13. Yang, Wanhong & Isik, Murat, 2004. "Integrating Farmer Decision Making to Target Land Retirement Programs," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 33(2), pages 1-12, October.
    14. Thomas Eichner & John Tschirhart, 2007. "Efficient ecosystem services and naturalness in an ecological/economic model," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 37(4), pages 733-755, August.
    15. Guilherme Nunes Martins & Andrea Sales Soares de Azevedo Melo, 2007. "O Valor da Opção de Preservação do Parque dos Manguezais em Recife-PE: Uma Utilização do Método de Opções Reais," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 8(4), pages 75-95.
    16. Brian R. Copeland & M. Scott Taylor, 2017. "Environmental and resource economics: A Canadian retrospective," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(5), pages 1381-1413, December.

    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q26 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Recreational Aspects of Natural Resources

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:canjec:v:33:y:2000:i:2:p:413-434. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1111/(ISSN)1540-5982 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.