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Implementing Faustmann–Marshall–Pressler at Scale: Stochastic Dynamic Programing in Space

In: The Econometrics of Networks

Author

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  • Harry J. Paarsch
  • John Rust

Abstract

The authors construct an intertemporal model of rent-maximizing behavior on the part of a timber harvester under potentially multidimensional risk as well as geographical heterogeneity. Subsequently, the authors use recursive methods (specifically, the method of stochastic dynamic programing) to characterize the optimal policy function – the rent-maximizing timber-harvesting profile. One noteworthy feature of their application to forestry in the province of British Columbia, Canada is the unique and detailed information the authors have organized in the form of a dynamic geographic information system to account for site-specific cost heterogeneity in harvesting and transportation, as well as uneven-aged stand dynamics in timber growth and yield across space and time in the presence of stochastic lumber prices. Their framework is a powerful tool with which to conduct policy analysis at scale.

Suggested Citation

  • Harry J. Paarsch & John Rust, 2020. "Implementing Faustmann–Marshall–Pressler at Scale: Stochastic Dynamic Programing in Space," Advances in Econometrics, in: The Econometrics of Networks, volume 42, pages 145-174, Emerald Group Publishing Limited.
  • Handle: RePEc:eme:aecozz:s0731-905320200000042011
    DOI: 10.1108/S0731-905320200000042011
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    More about this item

    Keywords

    Dynamic programing; timber rotation; spatial economics; C61; C81; D92; H32; L73; Q23;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • L73 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Forest Products
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry

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