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Optimal Rotation and Thinning

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The paper discusses the problem of simultaneous determination of optimal rotation and thinning. First, the classical conditions for optimal rotation are derived using continuous discounting. These derivations assume that the current net receipts (positive or negative) for the growing forest are given. At the same time as the optimal rotation is derived, a managerial decision on the optimal time for the first thinning is allowed for; and the interdependence of the two decisions is discussed. Finally, the management of the forest is treated as a continuous process when the problem is to determine at each point in time the optimal act to be undertaken, e.g. the amount of thinning together with the determination of optimal rotation. Since restrictions, such as limited funds, limited manpower, or the fact that the physical amount of thinning cannot be negative or larger than the available amount of timber, might be imposed, the problems must be solved subject to side conditions. These conditions are often functions of the decision variable. The possibility of using the solution as a device for decentralized decision making in a forest enterprise is discussed.

Keywords: Maximum principle; capital budgeting; financial maturity; investment

Document Type: Journal Article

Affiliations: Professor, Dep. of Business Administration, Stockholm University

Publication date: December 1, 1969

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