Sturla Furunes Kvamsdal
() and Stephen M. Stohs
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.
18 pages, September 10, 2010
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