An Optimal Stopping Approach to the Conservation of Biodiversity

In the past two decades, a considerable amount of concern has been expressed in academic and in nonacademic circles about the decline in the world's diverse biological resources. Recently, Swanson (l995b) has suggested that the problem of biodiversity loss is really a problem of regulating the natural habitat conversion process in which naturally existing species have systematically been replaced by human chosen ones. In this way of looking at the problem, a decision maker' s central task is to determine the optimal point at which this conversion process should be halted. In this paper, I show how the theory of optimal stopping can be applied to model the biodiversity loss problem as described above. Specifically, I pose the underlying conservation question within the framework of a Markov decision process. I then show how to determine the optimal point at which this conversion process should be halted.