Optimal Pricing


Biodiverse Renewable Natural Resources

(JEL codes: Q2, D00)

Sustainability of biodiverse renewable natural resources requires a pricing regime that can takes into account intrinsic rates of growth, heterogeneous harvesting rates, and the interdependence of species. Drawing on the theory of renewable natural resource pricing, we develop a discrete model of dynamic optimization of multiple species of renewable natural resources, along with an index of relative biodiversity. Using a sustainable yield framework, we then illustrate how interdependence can be factored within a dynamic optimization model to derive the corresponding shadow prices, and how the corresponding index of relative biodiversity will change over time. In turn, the corresponding shadow prices can be used to determine the value of harvesting permits consistent with species interdependence and sustainable growth.

 Economics and the Environment

1. The bioeconomic context

2. Extinction versus sustainability

3. Measures of sustainability

4. Measures of biodiversity

5. The pricing problem

6. Applications and implications




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