Valuing Perfect Knowledge in Timber Management
نویسنده
چکیده
Timber stumpage prices exhibit considerable volatility, which has a tremendous effect on the long-term returns associated with growing timber. Predicting trends in the market occupies a great deal of effort in forest economics research and practice. But what are the possible gains from having the ability to predict the future of timber stumpage markets? On the stand-level, forward-recursive dynamic programming can be used to estimate the value of perfect knowledge of future timber stumpage prices when those prices are simulated with a stochastic price function. Through repeated simulations, estimations of the value of market knowledge or market possibility knowledge can be made. This methodology can be used to explore the value of predicting future timber prices under situations where mean temporal price increase and variance parameters in a stochastic price function are modeled to represent differing long-term projections about U.S. stumpage markets. It can also be used to assess landowner risk to levels of return that are unacceptable.
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