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Resource Production Under Uncertainty: A Stochastic Control Approach to Timber Harvest Scheduling

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  • Bruce L. Dixon
  • Richard E. Howitt

Abstract

Most empirical natural resource management problems are intertemporal optimization problems under uncertainty. The Linear-Quadratic-Gaussian (LQG) method derives an approximate stochastic solution to such problems. The error in modeling resource dynamics and error in observing resource stocks are incorporated explicitly into the LQG problem solution. The LQG is outlined briefly and applied to the harvest-scheduling problem on the Stanislaus National Forest. The importance of knowing management preferences precisely is shown by stochastic simulations. In particular, harvest levels and the cost of a given source of uncertainty are shown to be quite sensitive to the objective function specification.

Suggested Citation

  • Bruce L. Dixon & Richard E. Howitt, 1980. "Resource Production Under Uncertainty: A Stochastic Control Approach to Timber Harvest Scheduling," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(3), pages 499-507.
    • Handle: RePEc:oup:ajagec:v:62:y:1980:i:3:p:499-507.
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    File URL: http://hdl.handle.net/10.2307/1240204
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    Cited by:

    1. Calum G. Turvey, 2010. "Biography," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 70(1), pages 5-20, May.
    2. Sloggy, Matthew R. & Kling, David M. & Plantinga, Andrew J., 2020. "Measure twice, cut once: Optimal inventory and harvest under volume uncertainty and stochastic price dynamics," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    3. Thang, Tran Cong & Burton, Michael P. & Brennan, Donna C., 2009. "Optimal replanting and cutting rule for coffee farmers in Vietnam," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 47638, Australian Agricultural and Resource Economics Society.
    4. Epperson, James E. & Huang, Wan-Tran, 1994. "The Potential For Supply Management Of Southeastern Sweet Onions," Journal of Food Distribution Research, Food Distribution Research Society, vol. 25(2), pages 1-7, September.
    5. Burt, Oscar R., 1982. "Dynamic Programming: Has Its Day Arrived?," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 7(2), pages 1-14, December.

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