Wilderness: options to preserve, extract, or develop

Option-pricing is used to evaluate the sequence and timing of wilderness preservation, resource extraction, and development. Resource extraction or development results in the permanent destruction of wilderness and the loss of an amenity dividend. Resource extraction does not preclude subsequent development. If the wilderness is directly developed (without prior extraction of resources), wilderness and resource extraction options are both killed. Starting from a state of wilderness, there are two stochastically evolving barriers, one for the price of the resource, and the other for the return on development. Wilderness is preserved provided the price of the resource never catches the price barrier and the return on development never catches the return barrier. (C) 2000 Elsevier Science B.V. All rights reserved.