Risks, Information and Short-Run Timber Supply

Abstract

Efforts to increase wood mobilization have highlighted the need to appraise drivers of short-run timber supply. The current study aims to shed further light on harvesting decisions of private forest owners, by investigating optimal harvesting under uncertainty, when timber revenues are invested on financial markets and uncertainty is mitigated by news releases. By distinguishing between aggregate economic risk and sector specific risks, the model studies in great detail optimal harvesting-investment decisions, with particular emphasis on the non-trivial transmission of risk on optimal harvesting, and on the way private forest owners react to news and information. The analysis of the role played by information in harvesting decisions is a novelty in forest economic theory. The presented model is highly relevant from a policy-information is a commonly used forest policy instrument-as well as a practical perspective, since the mechanism of risk transmission is at the basis of timber pricing.

Keywords

wood mobilization; timber supply; decision; uncertainty; risk; information; portfolio; financial market

Published in

Forests
2013, Volume: 4, number: 4, pages: 1158-1170

UKÄ Subject classification

Forest Science


Publication identifier

DOI: https://doi.org/10.3390/f4041158

Permanent link to this page (URI)

https://res.slu.se/id/publ/86488