Abstract

Using the management regimes of slash pine plantations in Georgia as an example this article examines the impact of serially correlated prices for multiple outputs on harvest decision and financial performance. A stochastic dynamic programming model is formulated to derive the optimal harvest strategy numerically. While the general rule remains to harvest when the observed stumpage prices are greater than the reservation prices, our results show that there exist multiple pairs of reservation prices at each stand age, and these reservation prices cannot be reduced to a single one. This is in contrast to cases where prices are independent overtime. Intensive silvicultural practices (e.g., herbicide use and fertilization) can reduce the reservation price and the variance of the financial return, but push up the mean return of a plantation project. Simulations with alternative price processes reveal that ignoring price uncertainty or price autocorrelations results in lower expected level but greater variability of the financial return and thus reduces investments by risk-averse investors

Published in

Forest Science
2004, Volume: 50, number: 1, pages: 10-19
Publisher: SOC AMER FORESTERS

SLU Authors

• Gong, Peichen

  • Department of Forest Economics, Swedish University of Agricultural Sciences
    

UKÄ Subject classification

Forest Science


Permanent link to this page (URI)

https://res.slu.se/id/publ/4965