Open AccessTHE FOREST ROTATION PROBLEM WITH STOCHASTIC HARVEST AND AMENITY VALUE
Author(s) -
ALVAREZ LUIS H.R.,
KOSKELA ERKKI
Publication year - 2007
Publication title -
natural resource modeling
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.28
H-Index - 32
eISSN - 1939-7445
pISSN - 0890-8575
DOI - 10.1111/j.1939-7445.2007.tb00218.x
Subject(s) - amenity , volatility (finance) , economics , valuation (finance) , revenue , marginal value , econometrics , value (mathematics) , mathematics , microeconomics , statistics , finance , accounting
. We present a general approach to study optimal rotation policy with amenity valuationunder stochastic forest stand value. We state a set of weak conditions under which a unique optimal harvesting threshold exists and derive the value of the optimal policy. We characterize the impact of forest stand value volatility on both the total and the marginal expected cumulative present value of the revenues accrued from amenities. We also illustrate our results numerically and find that depending on the precise characteristics of amenity valuation higher forest stand value volatility may accelerate the rotation policy by decreasing the optimal harvesting threshold.