On Solving the Multirotational Timber Harvesting Problem with Stochastic Prices: A Linear Complementarity Formulation
Abstract
Abstract This article develops a two‐factor real options model of the harvesting decision over infinite rotations assuming a known stochastic price process and using a rigorous Hamilton‐Jacobi‐Bellman methodology. The harvesting problem is formulated as a linear complementarity problem that is solved numerically using a fully implicit finite difference method. This approach is contrasted with the Markov decision process models commonly used in the literature. The model is used to estimate the value of a representative stand in Ontario's boreal forest, both when there is complete flexibility regarding harvesting time and when regulations dictate the harvesting date.
Reference
Margaret Insley; Kimberly Rollins. (2005). On Solving the Multirotational Timber Harvesting Problem with Stochastic Prices: A Linear Complementarity Formulation. American Journal of Agricultural Economics. https://doi.org/10.1111/j.1467-8276.2005.00759.x
Explore the literature
Follow references, discover citing works and find related studies.