The Long-Run Timber Supply Function

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Abstract:

The long-run equivalent annual timber supply functions resulting from two increasingly complicated versions of the Faustmann model were derived and examined. In both cases, the expression for the equivalent annual quantity of timber supplied was identical. A second main result was the mathematical proof that the slope of the long-run timber supply curve is positive along its entire length when establishment costs are fixed and variable. Some calculations were made using a well-established yield function for jack pine in Ontario, and these supported the theoretical conclusions. In contrast, the use of V*/t* as the equivalent annual output incorporates the implicit assumption that the discount rate is zero. For. Sci. 36(1):77-86.

Keywords: Annual rent; Faustmann formula; Hotelling's lemma; variable management intensity

Document Type: Journal Article

Affiliations: Faculty of Forestry, University of Toronto, 33 Willcocks St., Toronto, Ontario M5S 3B3

Publication date: March 1, 1990

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