Listing and Delisting Thresholds Under the Endangered Species Act
22 Pages Posted: 16 Apr 2020
Date Written: April 2017
We consider the case where a species provides a flow of economic benefits, is at risk of extinction, and is being considered for addition to the Endangered Species List. Listing a species as endangered is costly but increases the flow of social benefits and reduces the likelihood of extinction. If the species recovers sufficiently, additional costs can be incurred to subsequently delist the species. By treating listing and delisting as a pair of linked investment options, we provide an alternative to current practice for listing and delisting decisions that maximizes the return from public conservation investments. Under this alternative framework, we show that economic considerations may actually afford greater protection for at‐risk species if these decisions are initiated early. However, biological sources of uncertainty may cause those species most in need of protection to be passed over in favor of more stable species that represent a “sure bet” for species preservation.
Keywords: Endangered species, compound option, optimal switching, uncertainty, irreversibility
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