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A Generalization of the Tree Harvesting Paradigm
Author(s) -
Rodriguez Ricardo J.
Publication year - 1990
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1990.tb00810.x
Subject(s) - generalization , monotonic function , tree (set theory) , simple (philosophy) , horizon , net (polyhedron) , time horizon , mathematical economics , mathematics , value (mathematics) , economics , mathematical optimization , computer science , combinatorics , statistics , mathematical analysis , geometry , epistemology , philosophy
The tree harvesting paradigm finds the optimal length of each harvest cycle. Typically, only the extreme cases of one and infinite harvests are considered. We extend the model in two ways. First, we analyze an arbitrary number of harvest cycles and show that the optimal cycle length decreases monotonically with the number of cycles. Second, we relax the restrictive assumption requiring the disappearance of positive net present value opportunities as the final cycle is harvested. Instead, we assume these opportunities disappear after an exogenously fixed horizon. This simple change of assumptions produces solutions that may differ substantially from the traditional solutions.