An incremental analysis of the value of expanding a wilderness area

Forsyth (2000) concludes from an option value analysis that when considered together, Killarney Provincial Park and two adjacent parcels of land should be preserved in an expanded park. With a simple discrete difference approach, we assess the incremental value of the adjacent land and decompose the benefits of park expansion. We identify a change in the value of the option to log the current park as a new component of value not previously reported. Applying the method to Killarney suggests that logging may be the most efficient use of the adjacent land. We also provide corrections for some of Forsyth's numerical results.