Prescribed fire as a wildfire risk mitigation tool is receiving increasing attention in the United States after a century of emphasis on suppression. A dynamic economic model of prescribed fire use, precaution, and timing is developed and applied to three important policy issues: vegetation management on the wildland-urban interface; the effect of liability on vegetation management decisions; and the problem of heavy initial fuel loads after years of suppression and fuel accumulation. Numerical simulation results are presented as illustrations of the analytical model. © 2004 American Agricultural Economics Association.