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 nonacademic circles about the decline in the worldʹs diverse biological resources. Recently, Swanson (in: Biodiversity Loss: Economic and Ecological Issues. Cambridge University Press, Cambridge, 1995) 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a problem of regulating the natural habitat conversion process in which naturally existing species have systematically been replaced by human chosen ones.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 makerʹs 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.