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Banking on extinction: endangered species and speculation

Author

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

Abstract

Many wildlife commodities, such as tiger bones, bear bladders, ivory, and rhino horn, have been stockpiled in large quantities by speculators who expect that future price increases justify forgoing the interest income associated with current sales. When supply from private stores competes with supply from ‘wild populations’ (in nature) and when speculators are able to collude, it may be optimal to coordinate on an extinction strategy. We analyse the behaviour of a speculator who has access to a large initial store, and finds that it is optimal to deter poachers’ entry either by depressing prices (carefully timing own supply) or by depressing wild stocks. Which strategy maximizes profits critically depends on the initial wildlife stock and initial speculative stores. We apply the model to the case of black rhino conservation, and conclude it is likely that ‘banking on extinction’ is profitable if current speculators are able to collude. Contrary to conventional wisdom, we also find that extinction is favoured by such factors as low discount rates or high growth rates. Copyright 2012, Oxford University Press.

Suggested Citation

  • Charles F. Mason & Erwin H. Bulte & Richard D. Horan, 2012. "Banking on extinction: endangered species and speculation," Oxford Review of Economic Policy, Oxford University Press, vol. 28(1), pages 180-192, Spring.
  • Handle: RePEc:oup:oxford:v:28:y:2012:i:1:p:180-192
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    File URL: http://hdl.handle.net/10.1093/oxrep/grs006
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    Cited by:

    1. Moyle, Brendan, 2014. "The raw and the carved: Shipping costs and ivory smuggling," Ecological Economics, Elsevier, vol. 107(C), pages 259-265.
    2. Douglas J. Crookes & James N. Blignaut, 2015. "Debunking the myth that a legal trade will solve the rhino horn crisis: A system dynamics model for market demand," Working Papers 520, Economic Research Southern Africa.
    3. Collins, Alan & Cox, Caroline & Pamment, Nick, 2017. "Culture, Conservation and Crime: Regulating Ivory Markets for Antiques and Crafts," Ecological Economics, Elsevier, vol. 135(C), pages 186-194.
    4. repec:eee:resene:v:48:y:2017:i:c:p:55-67 is not listed on IDEAS
    5. Lopes, Adrian A., 2014. "Civil unrest and the poaching of rhinos in the Kaziranga National Park, India," Ecological Economics, Elsevier, vol. 103(C), pages 20-28.
    6. repec:eee:ecolec:v:141:y:2017:i:c:p:180-189 is not listed on IDEAS
    7. repec:eee:ecolec:v:141:y:2017:i:c:p:22-31 is not listed on IDEAS

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