Restoring Natural Resources with Destination-Driven Costs,

Economics typically assumes that injured natural resources are restored along a fixed path of increasing marginal costs. By contrast, many restoration efforts—such as cleaning a contaminated aquifer or replacing the sand on an oil-tarnished beach—are characterized bydestination-driven costs, which depend mainly on final quality, not the prerestoration quality. Given the resulting nonconvexities in cost, the optimal level of restoration may be a discontinuous and nonmonotonic function of post-injury quality. Regulatory rules should reflect these patterns, as should liability rules, since restoration plans and costs determine the expected cost of putting a resource at risk.