An Equilibrium Model of Habitat Conservation Under Uncertainty and Irreversibility

48 Pages Posted: 11 Jan 2011

See all articles by Luca Di Corato

Luca Di Corato

Ca Foscari University of Venice - Dipartimento di Economia

Michele Moretto

University of Padua, Dep of Economics and Management

Sergio Vergalli

University of Brescia - Department of Economics; Fondazione Eni Enrico Mattei (FEEM), Milan

Date Written: January 10, 2011

Abstract

In this paper stochastic dynamic programming is used to investigate habitat conservation by a multitude of landholders under uncertainty about the value of environmental services and irreversible development. We study land conversion under competition on the market for agricultural products when voluntary and mandatory measures are combined by the Government to induce adequate participation in a conservation plan. We analytically determine the impact of uncertainty and optimal policy conversion dynamics and discuss different policy scenarios on the basis of the relative long-run expected rate of deforestation. Finally, some numerical simulations are provided to illustrate our findings.

Keywords: Optimal Stopping, Deforestation, Payments For Environmental Services, Natural Resources Management

JEL Classification: C61, D81, Q24, Q58

Suggested Citation

Di Corato, Luca and Moretto, Michele and Vergalli, Sergio, An Equilibrium Model of Habitat Conservation Under Uncertainty and Irreversibility (January 10, 2011). FEEM Working Paper No. 160.2010, Available at SSRN: https://ssrn.com/abstract=1737642 or http://dx.doi.org/10.2139/ssrn.1737642

Luca Di Corato (Contact Author)

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

Michele Moretto

University of Padua, Dep of Economics and Management ( email )

via Del Santo 33
Padova, 35123
Italy
+39 049 8274265 (Phone)
+39 049 8274211 (Fax)

Sergio Vergalli

University of Brescia - Department of Economics ( email )

Via San Faustino 74B
Brescia, 25122
Italy

Fondazione Eni Enrico Mattei (FEEM), Milan ( email )

Corso Magenta 63
20123 Milan
Italy

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