On estimating the option value of preserving a wilderness area

Margaret Forsyth
Authors registered in the RePEc Author Service: Margaret Insley

Canadian Journal of Economics, 2000, vol. 33, issue 2, 413-434

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-codes: D81 Q26 (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (16)

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