Abstract:    Real option theory is concerned with the timing of investments that are costly to reverse and where future net benefits are uncertain (risky).  Ecologists have determined that geometric Brownian motion is a reasonable model for the population dynamics of an endangered species.  In this seminar, the optimal population threshold to initiate a conservation intervention will depend on estimates of the (1) drift and standard deviation rates before and after intervention, (2) fixed and variable costs of the intervention, (3) society's regret should the endangered species go extinct, and (4) society's rate of time preference.  The resulting real option model is applied to the captive breeding program for the California condor.

Biography:  Jon M. Conrad is Professor Emeritus in the Dyson School of Applied Economics and Management at Cornell University. He earned his Ph.D. in Economics from the University of Wisconsin, Madison in 1973. From 1973 through 1977 he was an Assistant Professor at the University of Massachusetts, Amherst. He joined the faculty at Cornell University in 1978. He has had visiting appointments at the University of British Columbia and the University of California, Berkeley. He is co-author, with Colin Clark, of Natural Resource Economics: Notes and Problems, (Cambridge University Press, 1987), and sole author of Resource Economics, Second Edition (Cambridge University Press, 2010). He has published articles in the Journal of Political Economy, the Quarterly Journal of Economics, Resource and Energy Economics, Ecological Economics, Land Economics, and the Journal of Environmental Economics and Management. His research focuses on the application of methods for dynamic optimization to the management of natural resources.