Evaluating the effects of risk on the economics of juvenile spacing and commercial thinning




Reed, William J.
Apaloo, Joseph

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The temporarily increased fire hazard which is believed to result from the process of thinning is included in a single-stand model for assessing the economic benefits of juvenile spacing. Formulas for the expected net present value and the land expectation value are given along with methods for determining the age of financial maturity and the optimal rotation age. A numerical example is given to illustrate the degree of loss due to the increased fire risk. The problem of commercial thinning when the risk of fire is present is addressed using continuous-time models. It is shown how, when the fire hazard is exogenous to the thinning activity, the problem reduces to one of deterministic optimal control with the discount rate adjusted upward by an amount equal to the fire hazard rate. In the case when the fire hazard increases whenever thinning is taking place, it is shown that in general the optimal thinning policy is qualitatively different from that which is optimal in the no-risk case and involves periods of thinning at the maximum rate interspersed with periods of no thinning activity.


Originally publish March 1989. Revised May 1990. Revised February 1991.