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Betting on Extinction: Endangered Species and Speculation

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  • Erwin H. Bulte
  • Charles F. Mason
  • Richard D. Horan

Abstract

For a number of animal species, speculators are betting on future price increases by holding large stockpiles of commodities from the animal. We develop a model to explain this behavior. We derive conditions where it can be optimal for a speculator to induce poachers to harvest so rapidly as to make extinction of the species inevitable. Results from a simulation based on the black rhino indicate that ‘‘betting on extinction’’ may be profitable for reasonable parameter values. We also find that extinction is favored by low discount rates or high growth rates.

Suggested Citation

  • Erwin H. Bulte & Charles F. Mason & Richard D. Horan, 2003. "Betting on Extinction: Endangered Species and Speculation," Land Economics, University of Wisconsin Press, vol. 79(4), pages 460-471.
    • Handle: RePEc:uwp:landec:v:79:y:2003:i:4:p:460-471
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    References listed on IDEAS

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    1. Paul Krugman, 1991. "History versus Expectations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 651-667.
    2. Rondeau, Daniel, 2001. "Along the Way Back from the Brink," Journal of Environmental Economics and Management, Elsevier, vol. 42(2), pages 156-182, September.
    3. Swanson, Timothy M, 1994. "The Economics of Extinction Revisited and Revised: A Generalised Framework for the Analysis of the Problems of Endangered Species and Biodiversity Losses," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 800-821, Supplemen.
    4. Timothy M. Swanson, 1994. "The Economics of Extinction Revisited and Revised," Palgrave Macmillan Books, in: The International Regulation of Extinction, chapter 3, pages 45-76, Palgrave Macmillan.
    5. Cropper, M. L., 1988. "A note on the extinction of renewable resources," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 64-70, March.
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    More about this item

    JEL classification:

    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery

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