An Empirical Study of Option Prices for Hunting Permits

Abstract

Using data from a 1992 survey of Maine hunters, we estimate the willingness to pay for a program that would eliminate the risk of non-participation in an otherwise lottery-rationed moose hunting system. We develop an empirical model to estimate the option price (OP) hunters have for eliminating this risk, based on survey data. We find an estimated OP to eliminate the non-participation risk associated with the lottery system of over $380. The estimated results are compared with the results of 12 years of management experience. We also provide a modest ex post analysis and overview of an auction of a small number of licenses occurring since 1998. Based on the estimates from the model and survey data, we believe that Moose management strategies in recent years would pass a benefit-cost test.

Keywords: Option price, lottery-rationed hunting, referendum contingent valuation, RUM

JEL Classification: H43, Q26