✍ Scribed by Olli Tahvonen; Seppo Salo; Jari Kuuluvainen
No coin nor oath required. For personal study only.
This study relaxes the assumption of perfect capital markets in the classical Faustmann forest rotation model. A constraint on borrowing changes all the basic properties of optimal forest harvesting. Instead of a constant rotation period, an in"nite chain of rotations is determined by a nonlinear di!erence equation. The rotation period evolves over time and approaches a stationary rotation in "nite or in"nite time. The length of optimal rotation, timber supply and the value of forest land depend on forest-ownerspeci"c factors that are normally nonexistent in rotation problems. The model explains several empirical "ndings that cause problems for the classical versions of the Faustmann model.
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