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Turnpikes and detours in the renewable resource exploitation under price shocks

Authors
Journal
Journal of Economic Dynamics and Control
0165-1889
Publisher
Elsevier
Publication Date
Volume
7
Issue
1
Identifiers
DOI: 10.1016/0165-1889(84)90045-9
Disciplines
  • Mathematics

Abstract

Abstract The maximum natural growth rate of the resource necessitates anticipative growth on the optimal path if the price increase is rapid enough. If the price path satisfies certain smoothness conditions, then the myopic rule is optimal.. We derive the length of the required forecasting horizon and the value of the forecasts in price shock situations, clarifying the concepts of the forecasting and the planning horizon. We introduce a new stochastic version of the model and reduce it to series of deterministic models — analogously to the Dasgupta—Heal model on new technology. A numerical example of Finnish forests is provided.

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