Amenities and Risk in Forest Management

Marielle Brunette (), Stéphane Couture and Eric Langlais

MPRA Paper from University Library of Munich, Germany

Abstract: The objective of the paper is to analyze the risk management behavior of a non-industrial private forest owner under uncertainty about timber production. Two types of hedging strategies with harvesting decisions are studied: a financial practice versus a physical one. We develop a two-period model of hedging and harvesting decisions when the forest owner values the amenity services of forest. We study the properties of optimal current and future harvesting and hedging decisions. We show that, except when both hedging instruments are perfect substitutes, the forest owner chooses a single tool, her/his choice depending on the rate of return of the hedging instrument. We also prove that the greater the marginal utility of amenity services, the smaller the harvesting amount. We provide a comparative statics analysis on current and future harvesting and on the hedging strategies. We are interested in the impact of an increase in initial stocks (wealth and timber), timber prices (periods 1 and 2), opportunity costs of the hedging instruments (rate of return for savings and cost of the regeneration process for physical practice) and expected risk. We show, for example, that an increase in expected risk has a negative impact on period 1 harvesting and the use of hedging tools for both strategies, while the impact on period 2 harvesting is positive for savings and null for physical practice.

Keywords: forest management; forest growth and natural risk; self-protection in forestry; savings and risk (search for similar items in EconPapers)
JEL-codes: D91 N5 N50 Q10 Q26 Q5 (search for similar items in EconPapers)
Date: 2009-02-12
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/14743/1/MPRA_paper_14743.pdf original version (application/pdf)

Related works:
Working Paper: Amenities and risk in forest management (2020)
Working Paper: Amenities and Risk in Forest Managemen (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:14743

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().