The Effect of Potential Catastrophic Mortality and Other Unpredictable Events on Optimal Forest Rotation Policy

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Abstract
Because standard methods for Computing the optimal rotation age of a forest stand assume complete knowledge of the stand value at any future time, a forest manager must treat his estimates of future value as if they were completely accurate. Minor, unpredictable fluctuations from year to year are assumed to somehow cancel each other out. Potential catastrophes, such as forest fires or insect plagues, are customarily ignored. An alternate method for dealing with uncertainty is presented here. This method can incorporate estimates of the likelihood of catastrophes. It is shown that catastrophic mortality has a potentially significant effect on the optimal rotation strategy, average profits, and land valuation. Forest Sci. 26:389–399.

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