Grassland Easement Evaluation and Acquisition with Uncertain Conversion and Conservation Returns

We develop an analytical framework to examine an agency's optimal grassland easement acquisition while accounting for landowners' optimal decisions under uncertainty in both conversion and conservation returns. We derive the value of "wait and see" (i.e., neither convert nor ease grassland) for landowners and find that grassland-to-cropland conversion probability and easement value vary in opposing directions when "wait and see" is preferred, indicating that a larger conversion probability does not necessarily imply a higher easement value. Our analysis shows that when conservation funds can be flexibly allocated across periods then the agency's optimal acquisition can be readily achieved by sorting land tracts according to their owners' optimal choices. When funds cannot be flexibly allocated across periods, we examine both a rational agency's and a myopic agency's decision problems. An acquisition index is developed to facilitate optimal easement acquisition.