Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2010/11: A Market-Based Approach to Manage Endangered Species Interactions

Sturla Furunes Kvamsdal () and Stephen M. Stohs ()
Additional contact information
Sturla Furunes Kvamsdal: Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway
Stephen M. Stohs: Southwest Fisheries Science Center, Postal: Southwest Fisheries Science Center, 3333 North Torrey Pines Court, La Jolla, CA 92037-1022, USA

Abstract: An economic activity interacts with an endangered species. The activity can be divided into mutually exclusive strata with different levels of interaction. Observing the activity in order to monitor interactions is costly. It may be desirable to manage the activity with a probability model which balances the benefit from the activity against the cost of the interaction with the endangered specie instead. The model gives rise to a permit scheme which fixates the risk of interaction over all strata and which uses the market mechanism to optimally allocate the activity between strata. The model can facilitate uncertainty in interaction rate estimates.

Keywords: Endangered species interactions; permit scheme; probability model

JEL-codes: Q50

18 pages, September 10, 2010

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