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The Equilibrium Price Path of Timber in the Absence of Replanting

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  • Salant, Stephen

    () (Resources for the Future)

Abstract

The forestry literature has sought to describe competitive equilibria by fi rst solving social planning problems. This "indirect" approach may cease to be useful in determining market equilibrium if the government intervenes. The equilibrium price path of timber is characterized directly here under the assumption that once a site is cleared, the site is used for some other purpose of exogenous value. While extreme, this assumption permits us to show that familiar Her ndahl results from the Hotelling literature extend to forestry economics: if di ffering in age, older trees are harvested fi rst; if diff erent in site value, trees on more valuable land are harvested first. As trees of the same vintage (or site value) are harvested, the timber price may decline during intervals when wood volume grows faster than the rate of interest. As the concluding section suggests, some of these results reappear in special cases of the model with replanting.

Suggested Citation

  • Salant, Stephen, 2012. "The Equilibrium Price Path of Timber in the Absence of Replanting," Discussion Papers dp-12-38, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-12-38
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-12-38.pdf
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    References listed on IDEAS

    as
    1. Tapan Mitra & Henry Y. Wan, 1985. "Some Theoretical Results on the Economics of Forestry," Review of Economic Studies, Oxford University Press, vol. 52(2), pages 263-282.
    2. Salo, Seppo & Tahvonen, Olli, 2002. "On Equilibrium Cycles and Normal Forests in Optimal Harvesting of Tree Vintages," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 1-22, July.
    3. GĂ©rard Gaudet, 2007. "Natural resource economics under the rule of Hotelling," Canadian Journal of Economics, Canadian Economics Association, vol. 40(4), pages 1033-1059, November.
    4. Lyon, Kenneth S., 1981. "Mining of the forest and the time path of the price of timber," Journal of Environmental Economics and Management, Elsevier, vol. 8(4), pages 330-344, December.
    5. David Levhari & Robert S. Pindyck, 1981. "The Pricing of Durable Exhaustible Resources," The Quarterly Journal of Economics, Oxford University Press, vol. 96(3), pages 365-377.
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    Cited by:

    1. Julien Daubanes & Pierre Lasserre, 2012. "Non-Renewable Resource Supply: Substitution Effect, Compensation Effect, and All That," CIRANO Working Papers 2012s-28, CIRANO.

    More about this item

    Keywords

    trees; forestry; Hotelling; Herfindahl; Faustmann; U-shaped price path;

    JEL classification:

    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General

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