2002 World Congress of Environmental and Resource Economists

A proposal to expand a wilderness area (Ontario's Killarney Provincial Park), rather than log the area, is evaluated in an option value framework. With recreational benefits evolving as a stochastic variation around a logistic process, the value of the proposed expansion is dependent on both the current benefits and on the (visitor) carrying capacity of the existing park. This prevents an immediate identification of the value of the expansion project on its own. A numerical method is devised to estimate the value of the proposed expansion, and to separate its component parts (Option Value and Expected Amenity Benefits). Contrary to recent results, we find that the expansion is not economically justified. We estimate the minimum willingness to pay of visitors required to justify the park's expansion, and study the relationship between option value and the volatility of the amenity flow. The study illustrates how Option Value Theory can be used to evaluate conservation decisions at the margin.



	Paper Title:	Option Values At The Margin: Assessing The Desirability Of Expanding A Protected Area
	Presenting Author:	Jonathan Buttle (University of Victoria)
	Coauthor 1:	Daniel Rondeau
	Coauthor 2:
	Coauthor 3:
	Abstract:	A proposal to expand a wilderness area (Ontario's Killarney Provincial Park), rather than log the area, is evaluated in an option value framework. With recreational benefits evolving as a stochastic variation around a logistic process, the value of the proposed expansion is dependent on both the current benefits and on the (visitor) carrying capacity of the existing park. This prevents an immediate identification of the value of the expansion project on its own. A numerical method is devised to estimate the value of the proposed expansion, and to separate its component parts (Option Value and Expected Amenity Benefits). Contrary to recent results, we find that the expansion is not economically justified. We estimate the minimum willingness to pay of visitors required to justify the park's expansion, and study the relationship between option value and the volatility of the amenity flow. The study illustrates how Option Value Theory can be used to evaluate conservation decisions at the margin.
	Link to paper:	Not available

	Session / Day / Time	17I / Thursday / 4:30 - 6:00 pm

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