 Could the Faustmann model have an interior minimum solution?Peichen Gong and Karl-Gustaf Löfgren Journal of Forest Economics, 2016, vol. 24, issue C, 123-129 Abstract: The growth of an even-aged stand usually follows a S-shaped pattern, implying that the growth function is convex when stand age is low and concave when stand age is high. Given such a growth function, the Faustmann model could in theory have multiple optima and hence an interior local minimum solution. To ensure that the rotation age at which the first derivative of the land expectation value equals zero is a maximum, it is often assumed that the growth function is concave in stand age. Yet there is no convincing argument for excluding the possibility of conducting the final harvest before the growth function changes to concave. We argue that under normal circumstances the Faustmann model does not have any interior minimum. It is neither necessary nor proper to assume that the growth function is concave in the vicinity of the optimal rotation age. When the interest rate is high, the optimal rotation may lie in the interval on which the growth function is convex, i.e. before volume or value growth culminates. Keywords: Forest economics; Optimal rotation age; S-shaped growth curve (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:foreco:v:24:y:2016:i:c:p:123-129 Ordering information: This journal article can be ordered from DOI: 10.1016/j.jfe.2016.06.001 Access Statistics for this article Journal of Forest Economics is currently edited by P. Gong and R. Brännlund More articles in Journal of Forest Economics from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.