Land use policies considering a natural ecosystem

Some wildlife creatures, such as carnivores, disease-carrying mosquitoes, and virus, encroach into a city and harm human lives, but they are important in terms of wildlife conservation. This paper studies land use policies for wildlife conservation as well as protection of human lives in a continuous monocentric city adjacent to a natural habitat with three species forming a food chain. We analytically characterize the second-best optimal policies, where the government increases carniboures’ risk of extermination within the city, and controls the city size and plant densities. The theoretical findings are that (i) the second-best optimal city size can be larger or smaller than the laissez-faire equilibrium city size; (ii) the optimal plant density should be equal across the habitat. Numerical simulations based on our parameters show that a set of second-best policies yields more than 90% of the first-best welfare gain.