Estimating Option Prices and Existence Values for Wildlife Resources

The benefit-cost analyst has traditionally focused on the use values of natural environments. However, other values should be counted as part of the total value of a natural resource or environment. In particular, Weisbrod (1964) set forth option value for natural environments, and Krutilla (1967) has suggested that individuals may have existence values for natural environments. Although the suggestions of Weisbrod and Krutilla have prompted much discussion in the literature regarding the theoretical nature of such values, little research has been directed toward empirical estimation (see Long 1967; Cicchetti and Freeman 1971; Schmalensee 1972; Bohm 1975; and Greenley et al. 1981). Much of this literature has been summarized and reviewed in Bishop (1982). An approach to valuing nonmarketed commodities, referred to as the contingent valuation approach, has been developed which can be successfully utilized in estimating values associated with retaining the option to future use and existence of a natural environment. Regardless of the theoretical arguments that option value will be positive, negative, or zero, option price (option value plus expected consumer surplus) is the appropriate value to measure increments or decrements of a natural environment. A straightforward application of the contingent valuation approach can be used to estimate both option price and existence value. However, the existing literature from Long (1967) through Schmalensee (1972, 1975) and Bohm (1975) to Bishop (1982) is