An Economic Assessment of Wildlife Farming and Conservation

Abstract:  The supply-side approach to conservation, as recommended by economists, prescribes the provision of cheap substitutes for wildlife commodities in an effort to lower the price of such commodities and reduce harvesting pressure. We developed a theoretical economic model to examine whether wildlife farming or ranching indeed contributes to conservation. We first present the naïve economic model that lends support to the supply-side approach. This model is incomplete because it fails to capture the fact that most wildlife markets are not perfectly competitive (instead, models are characterized by a small number of suppliers who have a certain degree of market power), which also implies that it fails to incorporate strategic interaction between suppliers. We then present an alternative model of the (illegal) wildlife trade that reflects imperfect competition and strategic interaction, and demonstrate that wildlife farming may stimulate harvesting (or poaching) rather than discourage it. By applying the model to the case of rhinoceros poaching and ranching, we demonstrate the potentially ambiguous outcomes of rhinoceros-ranching initiatives—wild rhinoceros stocks may recover or suffer from additional depletion, depending on key parameters and the type of competition on output markets. We also show that this type of ambiguity may be eliminated when policy makers restrict quantities of farmed output through a quota system; in that case, introducing wildlife farming will unambiguously promote conservation. In the absence of such accompanying regulation, however, policy makers should be careful when stimulating wildlife farming and be aware of potentially adverse consequences.