The Optimal Forest Rotation with Evolving Prices

Bhattacharyya, Rabindra N.; Snyder, Donald L.; Biswas, Basudeb

doi:10.2307/3146152

Cited by 28 publications

(13 citation statements)

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“…Hence, the rotation length increases when the price rate of change μ increases. This result holds when regeneration costs are positive, as shown numerically in [2]. This result also holds when timber prices follow geometric Brownian motion and regeneration costs are absent or accounted for in the price timber as shown in [14] and discussed in Section 5.…”

Section: Basic Wicksell's and Faustmann's Rotation Lengthsmentioning

confidence: 55%

“…Nevertheless, when timber prices increase exponentially at a constant rate in the presence of constant regeneration costs, if the rate of change increases statically (a one-time rise in terms of New Perspectives in Forest Sciencecomparative analysis), then the rotation length also increases, as in [2]. This result is also verified in the case of rising or stochastic timber prices and the possibility of changing land use, as in [13,14].…”

Section: Basic Wicksell's and Faustmann's Rotation Lengthsmentioning

confidence: 84%

“…To clear up this confusion, it is important to distinguish between a one-time static increase in the price change rate and its impact on the rotation length on the one hand, and the continuous increase of timber prices in time and their impact on successive rotation lengths on the other. For instance, when timber prices increase exponentially at a constant rate in the presence of constant regeneration costs, succeeding rotation lengths continuously decrease over time, as shown in [2]. Under these conditions, successive rotation lengths converge after some rotations to a certain length that can be higher or lower than the static Faustmann's rotation length a F .…”

Section: Basic Wicksell's and Faustmann's Rotation Lengthsmentioning

confidence: 97%

“…As pointed out in [2], some confusion exists in the literature with respect to timber price impact on forest rotation length. To clear up this confusion, it is important to distinguish between a one-time static increase in the price change rate and its impact on the rotation length on the one hand, and the continuous increase of timber prices in time and their impact on successive rotation lengths on the other.…”

Section: Basic Wicksell's and Faustmann's Rotation Lengthsmentioning

confidence: 99%

“…For instance, a generalized version of the Faustmann formula applies when stumpage prices and costs are known time functions in [1]. Rising timber prices were considered in [2] and changes in stumpage prices and costs in [3]. Others considered stochastic timber prices as in [4][5][6][7][8][9].…”

Section: Introductionmentioning

confidence: 99%

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Planting and Harvesting Decisions: A Review and Extension to the Case of Two Alternative Tree Species

Abdallah¹

2018

New Perspectives in Forest Science

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When to optimally harvest even-aged trees is a dominant concern in forest economics. In the literature, it was considered when the land is available for just one harvest (Wicksell setting) or multiple harvests (Faustmann setting). In this chapter, we will review the rotation lengths under both settings and focus on the impact of timber price variations on planting and harvesting decisions when one or two tree species are available for planting. When timber prices are rising but a species must be replaced by a more attractive species, rotation lengths before the switch are either constant and equal to the Faustmann's rotation, increasingly higher than the Faustmann's rotation, or decreasingly lower than the Faustmann's rotation. If timber prices are stochastic, forest managers prefer longer rotation lengths when the switch to the alternative tree species is about to occur as a means of postponing decision-making and waiting for more information related to timber prices. The possibility of replacing the planted species with an alternative species increases the land value, especially when timber prices are uncertain.

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Section: Basic Wicksell's and Faustmann's Rotation Lengthsmentioning

confidence: 55%