Non-timber benefits, price uncertainty and optimal harvest of an even-aged stand

Non-timber benefits and timber price uncertainty are two factors that can significantly affect forestry decisions. This paper examines the joint effects of these two factors on the optimal time to harvest an even-aged stand. Assuming that non-timber benefits are a function of stand age and that timber prices at different time points are uncorrelated, we show that the optimal strategy is to harvest when the observed price is greater than an age-dependent reservation price. Non-timber benefits affect the opportunity cost and the expected benefit of delaying the harvest at each age and, therefore, may affect the optimal reservation price. Numerical results are presented for example stands of Scots pine, where non-timber benefits are proportional to the standing timber stock. The results show that incorporating the non-timber benefits into the reservation price model significantly increases the optimal reservation prices and the land expectation value. However, the effects are smaller than when price uncertainty is ignored in the decision model.