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Environmental and Resource Economics

, Volume 73, Issue 2, pp 591–625 | Cite as

Pay for the Option to Pay? The Impact of Improved Scientific Information on Payments for Ecosystem Services

  • Susan Stratton SayreEmail author
Article
  • 220 Downloads

Abstract

The scientific information needed to precisely link land use changes to changes in ecosystem service provision is often unavailable, particularly for hydrological ecosystem services. Potential buyers of ecosystem services must weigh the risk of paying to induce conservation that fails to deliver valuable ecosystem services against the risk that land is developed before its value is known. This paper uses a two period model to assess when expected future improvements in scientific information should substantially impact payments for conservation today. Optimal current payments increase, often substantially, as the quality of expected future information increases, but the gain from increasing payments to account for the expected degree of improved information is small in many cases. Larger values occur when the buyer believes that the land whose private development value is the highest also provides the highest ecosystem service value, when the buyer faces relatively more uncertainty about ecosystem service provision than about the cost of inducing conservation, and when the buyer believes land is highly likely to be developed absent incentive payments.

Keywords

Ecosystem services Uncertainty Option value Numerical simulation 

Notes

Acknowledgements

This work was inspired in part by conversations with Drew Guswa and Casey Brown. I would like to thank Vis Taraz for helpful discussions and comments on earlier drafts of this work. I also appreciate the comments and suggestions of participants at the 2016 NAREA Annual Meeting and two anonymous referees.

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Copyright information

© Springer Nature B.V. 2018

Authors and Affiliations

  1. 1.Department of EconomicsSmith CollegeNorthamptonUSA

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