Optimal harvesting under resource stock and price uncertainty
AbstractWe analyze optimal harvesting policy under stochastic price and stock dynamics. We state a set of weak conditions under which the optimal policy can be characterized by a single exercise threshold and show that the value of optimal harvesting and depletion policies can be expressed as the separable form according to which only the current price and the expected per capita growth rate affect the threshold, while under risk neutrality volatility of price dynamics will have no effect. Uncertainty makes waiting valuable and the optimal threshold is higher when harvesting can be exercised only once than in the sequential case.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Dynamics and Control.
Volume (Year): 31 (2007)
Issue (Month): 7 (July)
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Web page: http://www.elsevier.com/locate/jedc
Other versions of this item:
- Luis H. R. Alvarez & Erkki Koskela, 2005. "Optimal Harvesting under Resource Stock and Price Uncertainty," CESifo Working Paper Series 1384, CESifo Group Munich.
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