On estimating the option value of preserving a wilderness area

In this paper option pricing theory is used to analyse whether or not to pr eserve a wilderness area. A numerical approach is demonstrated that can be applied to any generalized stochastic process. The impact of assuming that amenity value follows a logistic process, rather than geometric Brownian mo tion, is considered. The calculation of critical levels for amenity value n ecessary to justify preserving st wilderness area such as the Killarney Pro vincial Park in Ontario or the Headwaters Forest in California is demonstra ted. The impact of changing the assumed growth and volatility of amenity va lue is also examined.