On the Elasticities of Harvesting Rules
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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1989.01 EDIRC Provider-In, School of Economics, La Trobe University.
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- Miller, Robert A. & Voltaire, Karl, 1980. "A sequential stochastic tree problem," Economics Letters, Elsevier, vol. 5(2), pages 135-140.
- Reed, William J & Clarke, Harry R, 1990. "Harvest Decisions and Asset Valuation for Biological Resources Exhibiting Size-Dependent Stochastic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 147-69, February.
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