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Adaptive management decision of agroforestry under timber price risk

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  • Nana, Tian
  • Lu, Fadian

Abstract

In an effort to increase wood production and mitigate environmental problems, agro-forestry practices have emerged as a viable strategy in the Northern Plains of China, where one popular form of the agro-forestry system consists of fast-growing and high-yield plantation of poplar (populus) trees and the underwood planting of button mushroom (Agaricus bisporous). This paper examines adaptive management decision-making with stochastic dynamic programming under risk of timber price. Under the assumption of risk neutral preferences of the investors, the results suggest that the reservation price strategy remains optimal for the harvesting decision of agro-forests: when the timber price is higher than the reservation price, poplar trees should be harvested to end agro-forestry; otherwise, the trees should be retained. Numerical results are presented for sample agro-forest stands, which show that, with underwood planting, the reservation price for timber harvesting will be higher than that in pure forest.

Suggested Citation

  • Nana, Tian & Lu, Fadian, 2013. "Adaptive management decision of agroforestry under timber price risk," Journal of Forest Economics, Elsevier, vol. 19(2), pages 162-173.
    • Handle: RePEc:eee:foreco:v:19:y:2013:i:2:p:162-173
    DOI: 10.1016/j.jfe.2013.01.001
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    References listed on IDEAS

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    1. Pablo C. Benítez & Timo Kuosmanen & Roland Olschewski & G. Cornelis van Kooten, 2006. "Conservation Payments under Risk: A Stochastic Dominance Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 1-15.
    2. G. Cornelis Kooten, 2000. "Economic Dynamics of Tree Planting for Carbon Uptake on Marginal Agricultural Lands," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 48(1), pages 51-65, March.
    3. Lu, Fadian & Gong, Peichen, 2005. "Adaptive thinning strategies for mixed-species stand management with stochastic prices," Journal of Forest Economics, Elsevier, vol. 11(1), pages 53-71, June.
    4. Brent Sohngen & Robert Mendelsohn, 2003. "An Optimal Control Model of Forest Carbon Sequestration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(2), pages 448-457.
    5. Palma, J. & Graves, A.R. & Burgess, P.J. & van der Werf, W. & Herzog, F., 2007. "Integrating environmental and economic performance to assess modern silvoarable agroforestry in Europe," Ecological Economics, Elsevier, vol. 63(4), pages 759-767, September.
    6. Franzel, S. & Coe, R. & Cooper, P. & Place, F. & Scherr, S. J., 2001. "Assessing the adoption potential of agroforestry practices in sub-Saharan Africa," Agricultural Systems, Elsevier, vol. 69(1-2), pages 37-62.
    7. Lu, Fadian & Gong, Peichen & Lu, Fadian, 2003. "Optimal stocking level and final harvest age with stochastic prices," Journal of Forest Economics, Elsevier, vol. 9(2), pages 119-136.
    8. Sharawi, Huda Abdelwahab, 2006. "Optimal land-use allocation in central Sudan," Forest Policy and Economics, Elsevier, vol. 8(1), pages 10-21, January.
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    1. Tian, Nana & Poudyal, Neelam C. & Lu, Fadian, 2018. "Understanding landowners’ interest and willingness to participate in forest certification program in China," Land Use Policy, Elsevier, vol. 71(C), pages 271-280.
    2. Nana Tian & Neelam Poudyal & Fadian Lu, 2021. "Assessments of Landowners’ Willingness to Accept Compensation for Participating in Forest Certification in Shandong, China," Sustainability, MDPI, vol. 13(2), pages 1-15, January.

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