2002 World Congress of Environmental and Resource Economists

The economic management of renewable natural resources is challenging due to both environmental and market factors. Reed (1974) develops an optimization model for harvesting a renewable resource when prices are deterministic, but the stock evolution is stochastic. Arrow and Fisher (1974), demonstrate with a non-renewable resource that when prices are uncertain, this dynamic must be included in resource use decision frameworks when irreversible decisions are made. This paper contributes to the literature by developing a resource management model that integrates price and stock uncertainty for renewable natural resource management. A two-period Bellman equation, based on Reed’s model, is developed to obtain the optimal harvesting policy. The importance of considering both price and stock uncertainty when prices may fall below costs is made by proposition, mathematical proof and by example.



	Paper Title:	The Optimal Economic Management Of A Renewable Natural Resource Under Price And Stock Uncertainty
	Presenting Author:	Ellen Burnes (CSU Fresno, Dept of Agriculture Economics)
	Coauthor 1:	Enrique Thomann
	Coauthor 2:	Edward C Waymire
	Coauthor 3:
	Abstract:	The economic management of renewable natural resources is challenging due to both environmental and market factors. Reed (1974) develops an optimization model for harvesting a renewable resource when prices are deterministic, but the stock evolution is stochastic. Arrow and Fisher (1974), demonstrate with a non-renewable resource that when prices are uncertain, this dynamic must be included in resource use decision frameworks when irreversible decisions are made. This paper contributes to the literature by developing a resource management model that integrates price and stock uncertainty for renewable natural resource management. A two-period Bellman equation, based on Reed’s model, is developed to obtain the optimal harvesting policy. The importance of considering both price and stock uncertainty when prices may fall below costs is made by proposition, mathematical proof and by example.
	Link to paper:	Not available

	Session / Day / Time	2D / Monday / 10:15 - 11:45 am

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