Harvesting and recovery decisions under uncertainty

Mark Shackleton and Sigbjørn Sødal

Journal of Economic Dynamics and Control, 2010, vol. 34, issue 12, 2533-2546

Abstract: A stochastic forest rotation model in the Faustmann tradition is presented and exemplified. The model combines harvesting decisions with the potential to recover or clean up to restore the land after very unfavorable evolutions of the stochastic growth process. Uncertainty is shown to have a generally ambiguous effect on the optimal choice of investment strategy. It is also shown how such models can be related to theory of optimal inventory control.

Keywords: Investment; Uncertainty; Forest; growth; Real; options (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:34:y:2010:i:12:p:2533-2546

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