Harvest Decisions and Asset Valuation for Biological Resources Exhibiting Size-Dependent Stochastic Growth

Reed, William J.; Clarke, Harry

doi:10.2307/2526634

Cited by 102 publications

(52 citation statements)

References 18 publications

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“…Of related work, Clarke & Reed (1989) and Reed & Clarke (1990) introduced price and growth uncertainty in a forest harvest model, modelling the price process as geometric Brownian motion and assuming stock growth to be age or size dependent. Brennan & Schwartz (1985) present a model where a project, a mine is used as an example, can operate in two modes; active or passive.…”

Section: Introductionmentioning

confidence: 99%

Regime switching in a fishery with stochastic stock and price

Nøstbakken

2006

Journal of Environmental Economics and Management

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We develop a bioeconomic model of a fishery subject to stock uncertainty and price uncertainty. With a linear control model, the optimal harvest policy is a bang-bang approach to the optimal stock level, where one harvests either at minimum or full capacity. It is assumed that changing the harvest rate is subject to a switching cost. In this case we show that there are two switching curves in stock-price space, one for entering and one for leaving the fishery. Numerical methods are used to characterize the optimal switching policy for the fishery.

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Section: Introductionmentioning

confidence: 99%

Regime switching in a fishery with stochastic stock and price

Nøstbakken

2006

Journal of Environmental Economics and Management

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“…As demonstrated in Clarke and Reed (1989) and Reed and Clarke (1990), the harvesting rules depend on whether the tree growth is age-dependent or size-dependent. For this reason, we focus on the benchmark case in which the growth pattern of a tree follows geometric Brownian motion.…”

Section: Introductionmentioning

confidence: 93%

On the elasticities of harvesting rules

Chang¹

2005

Journal of Economic Dynamics and Control

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In this paper, we rank the relative importance of the exogenous parameters upon the optimal harvesting size in a stochastic rotation problem. We show that when the tree growth follows geometric Brownian motion, the harvesting size is most elastic to the harvesting cost, followed by the interest rate, and is least elastic to the parameters of tree growth. Similar ranking holds for the linear growth case. In both cases the harvesting size is increasing and concave in the harvesting cost, bounded between two parallel lines. The harvesting decision is made according to a stochastic extension of the Faustmann formula. Terms of use: Documents in EconStor mayJEL Classification: Q23, O13.

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“…In the literature on optimal tree harvesting, early papers adopting the GBM assumption include Reed and Clarke (1990), Clarke and Reed (1989), Yin and Newman (1995), and Morck et al (1989).…”

Section: Modeling Commodity Prices: An Overview Of Selected Literaturementioning

confidence: 99%

Regime switching in stochastic models of commodity prices: An application to an optimal tree harvesting problem

Shan

Insley

2012

Journal of Economic Dynamics and Control

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This paper investigates whether a regime switching model of stochastic lumber prices is better for the analysis of optimal harvesting problems in forestry than a more traditional single regime model. Prices of lumber derivatives are used to calibrate a regime switching model, with each of two regimes characterized by a different mean reverting process. A single regime, mean reverting process is also calibrated. The value of a representative stand of trees and optimal harvesting prices are determined by specifying a Hamilton-JacobiBellman Variational Inequality, which is solved for both pricing models using a fully implicit finite difference approach. The regime switching model is found to more closely match the behaviour of futures prices than the single regime model. In addition, analysis of a tree harvesting problem indicates significant differences in terms of land value and optimal harvest thresholds between the regime switching and single regime models.JEL Classification: C63, C61, Q23, D81

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Harvest Decisions and Asset Valuation for Biological Resources Exhibiting Size-Dependent Stochastic Growth

Cited by 102 publications

References 18 publications

Regime switching in a fishery with stochastic stock and price

Regime switching in a fishery with stochastic stock and price

On the elasticities of harvesting rules

Regime switching in stochastic models of commodity prices: An application to an optimal tree harvesting problem

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