Harvest Decisions And Asset Valuation For Biological Resour

Optimal harvest rules and preharvest valuation procedures are deduced for biological assets with stochastic size-dependent growth in a stochastic price environment. These rules are analyzed as continuous-time optimal stopping problems, and both the "single-rotation" and the "ongoing-r...

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Bibliographic Details
Published in:International economic review (Philadelphia) 1990-02, Vol.31 (1), p.147
Main Authors: Reed, William J, Clarke, Harry R
Format: Article
Language:English
Subjects:
Assets
Ecology
Economic development
Economic theory
Growth rate
Harvest
Market prices
Market value
Price variance
Statistical analysis
Stochastic models
Studies
Valuation
Variables
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Summary:Optimal harvest rules and preharvest valuation procedures are deduced for biological assets with stochastic size-dependent growth in a stochastic price environment. These rules are analyzed as continuous-time optimal stopping problems, and both the "single-rotation" and the "ongoing-rotations" problems are addressed. The sensitivity of harvest and valuation rules is estimated. Results are compared with those derived from a "myopic look-ahead" procedure along with the corresponding findings for age-dependent groups. Over a single rotation, a barrier rule on size is shown to be optimal. The size of the barrier can be computed by solving a Riccati equation from a given initial condition until a predetermined endpoint condition is satisfied. With "ongoing rotations," a barrier on size also provides the optimal harvest and can be calculated similarly. For practical resource management decision making in a stochastic environment, the choice between age and size-dependent growth specifications has an important impact on the form of optimal management rules.
ISSN:0020-6598
1468-2354