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Real Options in Resource Economics

Author

Listed:
  • Esther W. Mezey
  • Jon M. Conrad

    (Department of Applied Economics and Management, Cornell University, Ithaca, New York 14853)

Abstract

In the real options approach to capital budgeting, plans that allow for flexibility in the design or timing of an investment or economic action are valuable. Real options naturally arise in decisions to develop, extract, or harvest natural resources. We (a) review the existing literature in the economics of forestry, fishery, water, and nonrenewable resources; (b) illustrate the real options approach in resource economics through a series of simple models; and (c) suggest open questions and new areas of application when taking a real options approach to the development and management of natural resources.

Suggested Citation

  • Esther W. Mezey & Jon M. Conrad, 2010. "Real Options in Resource Economics," Annual Review of Resource Economics, Annual Reviews, vol. 2(1), pages 33-52, October.
    • Handle: RePEc:anr:reseco:v:2:y:2010:p:33-52
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-resource-040709-135122
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    More about this item

    Keywords

    natural resources; conservation;

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General

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