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Real Options Conference 2024

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Optimal Management of Biodiversity Preservation Under Uncertainty and Ambiguity Aversion

We study the decision to preserve diverse species when the value of biodiversity is uncertain, or even affected by ambiguity. Optimal decisions are derived both from the perspective of the producer/investor and the policy regulator (ecosystem planner). We find that while calculated risk creates a scope for biodiversity preservation, the presence of ambiguity aversion reduces it, thus accelerating the extinction of species with lower value. Our results suggest that effective conservation strategies would involve a reduction of ambiguity aversion by creating a stable and transparent policy environment. Furthermore, they may involve a two tier strategy, with one tier addressing output targets and the other conservation targets.

Elettra Agliardi
Department of Economics, University of Bologna

Rossella Agliardi
Department of Mathematics, University of Bologna

Willem Spanjers
Faculty of Business and Social Sciences, Kingston University
United Kingdom


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