Optimal harvesting with auto-correlated stumpage prices

Richard J Brazee, Gregory S. Amacher, M. Christine Conway

Research output: Contribution to journalArticlepeer-review

Abstract

We discuss the theoretical results from the use of Adaptive Management when stumpage prices are formed by a first-order autoregressive process. Random walks and random draws are analyzed as endpoints of a continuum of first-order autoregressive stumpage price process. Building on previous studies, we find that reservation prices exist and are optimal, and that the expected NPV of land and stumpage under Adaptive Management varies directly with the size of the spread of the stumpage price distribution. A key new result is that the size of the gains in the expected NPV of both land and stumpage from the use of Adaptive Management vary directly with the level of reversion to the mean. Using time series analysis, we examine a hardwood stumpage price and a pine stumpage price series in Virginia, USA. We find the series are autocorrelated.

Original languageEnglish (US)
Pages (from-to)201-216
Number of pages16
JournalJournal of Forest Economics
Volume5
Issue number2
StatePublished - 1999

Keywords

  • Adaptive Management
  • Random draw
  • Random walk
  • Reservation prices
  • Stumpage prices

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Forestry
  • Ecology

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