Optimal forest rotation with in situ preferences

This study develops a utility maximization, infinite horizon forest rotatio n model that includes in situ values and the forest owner's consumption-sav ings decision making. The value of forest land becomes owner-specific and d epends on property rights related to in situ benefits. The length of the ro tation period depends, e.g., on the wealth of the forest owner and may evol ve in time. A forest owner with accumulating nonforest assets never continu es harvesting forever. In contrast, with decreasing nonforest assets the ro tation period converges toward the Faustmann solution. In a multiple-stand version of the model, the harvesting decisions regarding different stands a re linked together via the budget constraint and the dependence of an indiv idual stand's ill situ value on the age structure of the whole forest. Nume rical simulation with two stands suggests that, within the class of concave in situ valuation functions, the optimal solution yields convergence towar d forests with increasing heterogeneity of age structures. (C) 1999 Academi c Press.