Optimal exploitation of a renewable resource with capital limitations
A model of interaction between a renewable natural resource with capital limitations, as exemplified by the optimal investment problem of sheep farming in a Nordic context, is analyzed. The model builds on existing studies from the fisheries literature, but the important difference is that while capital is related to harvesting effort in the fisheries, capital attributes to production capacity to keep the animal stock during the winter in our farm model. The paper provides several results where both optimal steady states and the optimal approach paths are characterized analytically. The results are further supported by a numerical example.
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- Asheim, Geir B., 2008. "Paradoxical consumption behavior when economic activity has environmental effects," Journal of Economic Behavior & Organization, Elsevier, vol. 65(3-4), pages 529-546, March.
- Anders Skonhoft, 2008. "Sheep as capital goods and farmers as portfolio managers: a bioeconomic model of Scandinavian sheep farming," Agricultural Economics, International Association of Agricultural Economists, vol. 38(2), pages 193-200, 03.
- Jarvis, Lovell S, 1974. "Cattle as Capital Goods and Ranchers as Portfolio Managers: An Application to the Argentine Cattle Sector," Journal of Political Economy, University of Chicago Press, vol. 82(3), pages 489-520, May/June.
- Boyce John R., 1995. "Optimal Capital Accumulation in a Fishery: A Nonlinear Irreversible Investment Model," Journal of Environmental Economics and Management, Elsevier, vol. 28(3), pages 324-339, May.
- Richard D. Horan & Christopher A. Wolf, 2005. "The Economics of Managing Infectious Wildlife Disease," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(3), pages 537-551.
- Sandal, Leif Kristoffer & Steinshamn, Stein Ivar, 2006. "Irreversible Investments Revisited," Discussion Papers 2006/11, Department of Business and Management Science, Norwegian School of Economics.
- McKelvey, Robert, 1985. "Decentralized regulation of a common property renewable resource industry with irreversible investment," Journal of Environmental Economics and Management, Elsevier, vol. 12(4), pages 287-307, December.
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