Harvesting and recovery decisions under uncertainty

Abstract A stochastic forest rotation model in the Faustmann tradition is presented and exemplified. The model combines harvesting decisions with the potential to recover or clean up to restore the land after very unfavorable evolutions of the stochastic growth process. Uncertainty is shown to have a generally ambiguous effect on the optimal choice of investment strategy. It is also shown how such models can be related to theory of optimal inventory control.