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On the elasticities of harvesting rules

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  • Chang, Fwu-Ranq

Abstract

In this paper, we rank the relative importance of the exogenous parameters upon the optimal harvesting size in a stochastic rotation problem. We show that when the tree growth follows geometric Brownian motion, the harvesting size is most elastic to the harvesting cost, followed by the interest rate, and is least elastic to the parameters of tree growth. Similar ranking holds for the linear growth case. In both cases the harvesting size is increasing and concave in the harvesting cost, bounded between two parallel lines. The harvesting decision is made according to a stochastic extension of the Faustmann formula.
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  • Chang, Fwu-Ranq, 2005. "On the elasticities of harvesting rules," Journal of Economic Dynamics and Control, Elsevier, vol. 29(3), pages 469-485, March.
    • Handle: RePEc:eee:dyncon:v:29:y:2005:i:3:p:469-485
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    1. Clarke, Harry R. & Reed, William J., 1989. "The tree-cutting problem in a stochastic environment : The case of age-dependent growth," Journal of Economic Dynamics and Control, Elsevier, vol. 13(4), pages 569-595, October.
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    7. William A. Brock & Michael Rothschild & Joseph E. Stiglitz, 1989. "Stochastic Capital Theory," Palgrave Macmillan Books, in: George R. Feiwel (ed.), Joan Robinson and Modern Economic Theory, chapter 20, pages 591-622, Palgrave Macmillan.
    8. Samuelson, Paul A, 1976. "Economics of Forestry in an Evolving Society," Economic Inquiry, Western Economic Association International, vol. 14(4), pages 466-492, December.
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    10. Tahvonen, Olli & Salo, Seppo & Kuuluvainen, Jari, 2001. "Optimal forest rotation and land values under a borrowing constraint," Journal of Economic Dynamics and Control, Elsevier, vol. 25(10), pages 1595-1627, October.
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    Cited by:

    1. Sora Yoo & Yong-sung Cho & Hojeong Park, 2018. "An Optimal Management Strategy of Carbon Forestry with a Stochastic Price," Sustainability, MDPI, vol. 10(9), pages 1-13, September.
    2. Alvarez, Luis H.R. & Koskela, Erkki, 2006. "Does risk aversion accelerate optimal forest rotation under uncertainty?," Journal of Forest Economics, Elsevier, vol. 12(3), pages 171-184, December.
    3. Shackleton, Mark B. & Sødal, Sigbjørn, 2010. "Harvesting and recovery decisions under uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 34(12), pages 2533-2546, December.
    4. Leon-Santana, Miguel & Hernandez, Juan M., 2008. "Optimum management and environmental protection in the aquaculture industry," Ecological Economics, Elsevier, vol. 64(4), pages 849-857, February.
    5. Tahvonen, Olli & Suominen, Antti & Malo, Pekka & Viitasaari, Lauri & Parkatti, Vesa-Pekka, 2022. "Optimizing high-dimensional stochastic forestry via reinforcement learning," Journal of Economic Dynamics and Control, Elsevier, vol. 145(C).
    6. Gasca-Leyva, Eucario & Hernández, Juan M. & Veliov, Vladimir M., 2008. "Optimal harvesting time in a size-heterogeneous population," Ecological Modelling, Elsevier, vol. 210(1), pages 161-168.

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