Risk aversion and optimal forest replanting: A stochastic efficiency study

European Journal of Operational Research

Volumn 181, Issue 3, 2007, Pages 1584-1592

  Lien, G ^a,b   Stordal S ^a   Hardaker, J B ^c   Asheim, L J ^b  

^a EASTERN NORWAY RESEARCH INSTITUTE   (Norway)

^b NORWEGIAN INSTITUTE OF BIOECONOMY RESEARCH   (Norway)

^c UNIVERSITY OF NEW ENGLAND   (Australia)

Author keywords

Decision analysis; Dynamic risk analysis; Optimal forestry rotation; Replacement policy; Stochastic budgeting; Stochastic dominance with respect to a function

Indexed keywords

DECISION THEORY; RISK MANAGEMENT; STOCHASTIC PROGRAMMING;

DYNAMIC RISK ANALYSIS; OPTIMAL FORESTRY ROTATION; REPLACEMENT POLICY; STOCHASTIC BUDGETING; STOCHASTIC DOMINANCE WITH RESPECT TO A FUNCTION;

FORESTRY;

DECISION THEORY; FORESTRY; MATHEMATICAL ANALYSIS; RISK MANAGEMENT;

EID: 33947632011     PISSN: 03772217     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.ejor.2005.11.055     Document Type: Article

References (41)

1. Alvarez, L.H.R., Koskela, E., 2004. Does risk aversion accelerate optimal forest rotation under uncertainty? Helsinki Center of Economic Research, Discussion Paper No. 21.
2. Anderson J.R., and Dillon J.L. Risk Analysis in Dryland Farming Systems. Farming Systems Management Series No. 2 (1992), FAO, Rome
3. Anderson J.R., and Hardaker J.B. Risk aversion in economic decision making: Pragmatic guides for consistent choice by natural resource managers. In: Wesseler L., Weikard H.P., and Weaver R. (Eds). Risk and Uncertainty in Environmental Economics (2003), Edward Elgar, Cheltenham
4. Arrow K.J. Aspects of the Theory of Risk-Bearing (1965), Yrjö Jahnssonin Säätiö, Academic Bookstore, Helsinki
5. Blennow K., and Sallnäs O. Risk perception among non-industrial private forest owners. Scandinavian Journal of Forest Research 17 (2002) 472-479
6. Brazee R.J., and Mendelsohn R. Timber harvesting with fluctuating prices. Forest Science 34 (1988) 359-372
7. Brazee R.J., and Newman D.H. Observations on recent forest economics research on risk and uncertainty. Journal of Forest Economics 5 (1999) 193-200
8. Brumelle S., Stanbury W.T., Thompson W.A., Vertinsky I., and Wehrung D. Framework for the analysis of risks in forest management and silvicultural investments. Forest Ecology and Management 35 (1990) 279-299
9. Caulfield J.P. A stochastic efficiency approach for determining the economic rotation of a forest stand. Forest Science 34 (1988) 441-457
10. Clarke H.R., and Reed W.J. The tree-cutting problem in a stochastic environment. The case of age-dependent growth. Journal of Economic Dynamic and Control 13 (1989) 569-595
11. Eid T., Hoen H.F., and Økseter P. Timber production possibilities of the Norwegian forest area and measures for a sustainable forestry. Forest Policy and Economics 4 (2002) 187-200
12. Faustmann, M., 1849. Berechnung des Wertes welchen Waldboden Sowie noch nicht Haubare Holzbestände für die Waldwirtschaft Besitzen, Allgemeine Forst- und Jagd-Zeitung 15. Calculation of the value which forest land and immature stands possess for forestry. Translated and reprinted in Journal of Forest Economics 1 (1995) 7-44.
13. Gong P. Risk preferences and adaptive harvest policies for even-aged stand management. Forest Science 44 (1998) 496-506
14. Gong P., and Löfgren K.G. Risk-aversion and the short-run supply of timber. Forest Science 49 (2003) 647-656
15. Hadar J., and Russell W.R. Rules for ordering uncertain prospects. American Economic Review 49 (1969) 25-34
16. Hanoch G., and Levy H. Efficiency analysis of choices involving risk. Review of Economic Studies 36 (1969) 335-345
17. Hardaker J.B., Huirne R.B.M., Anderson J.R., and Lien G. Coping with Risk in Agriculture. second ed. (2004), CABI Publishing, Wallingford
18. Hardaker J.B., Richardson J.W., Lien G., and Schumann K.D. Stochastic efficiency analysis with risk aversion bounds: A simplified approach. Australian Journal of Agricultural and Resource Economics 48 (2004) 253-270
19. Harvey A. Estimating regression models with multiplicative heteroscedasticity. Econometrica 44 (1976) 461-465
20. Johansson P.O., and Löfgren K.G. The Economics of Forestry and Natural Resources (1985), Basis Blackwell, Oxford
21. Kangas J. Incorporating risk attitude into comparison of reforestation alternatives. Scandinavian Journal of Forest Research 9 (1994) 297-304
22. Kangas S., and Kangas J. Probability, possibility and evidence: Approaches to consider risk and uncertainty in forestry decision analysis. Forest Policy and Economics 6 (2004) 169-188
23. King P.K., and Robison L.J. Risk efficiency models. In: Barry P.J. (Ed). Risk Management in Agriculture (1984), Iowa State University Press, Ames, IA
24. Koskela E. Forest taxation and timber supply under price uncertainty: Perfect capital markets. Forest Science 35 (1989) 137-159
25. Lien G., Størdal S., Hardaker J.B., and Asheim L.J. Optimal rotation of a forest and risk aversion: A stochastic efficiency approach. 15th Mini-EURO Conference "Managing Uncertainty in Decision Support Models" (2004), The Association of European Operation Research Society, Coimbra, Portugal
26. Lin W.R., and Chang H.S. Specification of Bernoullian utility function in decision analysis. Agricultural Economics Research 30 (1978) 30-36
27. Lönnstedt L., and Svensson J. Non-industrial private forest owners' risk preferences. Scandinavian Journal of Forest Research 15 (2000) 651-660
28. Marshall P.L. A procedure for constructing timber management strategies under uncertainty. Canadian Journal of Forest Research 18 (1987) 398-405
29. Meyer J. Second-degree stochastic dominance with respect to a function. International Economic Review 18 (1977) 477-487
30. Newman D.H. Forestry's golden rule and the development of the optimal rotation literature. Journal of Forest Economics 8 (2002) 5-27
31. Newman D.H., Gilbert C.B., and Hyde W.F. The optimal forest rotation with evolving prices. Land Economics 61 (1985) 347-353
32. Ollikainen M. Forest taxation and the timing of private nonindustrial forest harvests under interest rate uncertainty. Canadian Journal of Forest Research 20 (1990) 1823-1829
33. Plantinga A.J. The optimal timber rotation: An option value approach. Forest Science 44 (1998) 192-202
34. Reed W.J. The effects of risk of fire on the optimal rotation of forest. Journal of Environmental Economics and Management 11 (1984) 180-190
35. Richardson, J.W., 2004. Simulation for Applied Risk Management with an Introduction to the Excel Simulation Add-In: Simetar. Department of Agricultural Economics, Texas A&M University, College Station.
36. Richardson J.W., Klose S.L., and Gray A.W. An applied procedure for estimating and simulating multivariate empirical (MVE) probability distributions in farm-level risk assessment and policy analysis. Journal of Agriculture and Applied Economics 32 (2000) 299-315
37. Taylor R.G., and Fortson J.C. Optimum plantation planting density and rotation age based on financial risk and return. Forest Science 37 (1991) 886-902
38. Uusivuori J. Nonconstant risk attitudes and timber harvesting. Forest Science 48 (2002) 459-470
39. Valsta L.T. A scenario approach to stochastic anticipatory optimization in stand management. Forest Science 38 (1992) 430-447
40. Willassen Y. The stochastic rotation problem: A generalization of Faustmann's formula to stochastic forest growth. Journal of Economic Dynamics and Control 22 (1998) 573-596
41. Yin R., and Newman D.H. The effect of catastrophic risk on forest investment decision. Journal of Environmental Economics and Management 31 (1996) 186-197