Timber Harvesting with Fluctuating Prices

Authors: Brazee, Richard; Mendelsohn, Robert

Source: Forest Science, Volume 34, Number 2, 1 June 1988 , pp. 359-372(14)

Publisher: Society of American Foresters

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Abstract:

Because of volatility in demand, timber prices tend to fluctuate from year to year. Timber owners know today's price but are uncertain about tomorrow's prices. Traditional Faustmann harvesting ignores these random annual price fluctuations and prescribes harvests on the basis of expected prices. In this paper, we adapt an asset sale model to forestry and solve for the optimal schedule of reservation prices. When current price is above the reservation price, owners should cut that age class, otherwise they should wait another year. This flexible price harvest policy significantly increases the present value of expected returns over the more rigid Faustmann model. For. Sci. 34(2):359-372.

Keywords: Asset sale model; Douglas-fir; dynamic programming; forest management; loblolly pine; price uncertainty

Document Type: Journal Article

Affiliations: Associate Professor at Yale University

Publication date: June 1, 1988

More about this publication?
  • Forest Science is a peer-reviewed journal publishing fundamental and applied research that explores all aspects of natural and social sciences as they apply to the function and management of the forested ecosystems of the world. Topics include silviculture, forest management, biometrics, economics, entomology & pathology, fire & fuels management, forest ecology, genetics & tree improvement, geospatial technologies, harvesting & utilization, landscape ecology, operations research, forest policy, physiology, recreation, social sciences, soils & hydrology, and wildlife management.
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