The Hyperbolic Forest Owner

• Autor(a) principal: Ducla-Soares, Maria Manuela
• Data de Publicação: 2001
• Outros Autores: Costa-Duarte, Maria Clara, Cunha-e-Sá, Maria A.
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10362/83531
• topic: Hyperbolic discounting; Time preference; Dynamic inconsistency; Faustman model; Optimal rotation

This paper examines the implications of quasi-hyperbolic inter-temporal preferences to the Faustman model. The use of decreasing discount rates leads to dynamically inconsistent behavior. To solve this problem a two-stages optimization decision model is developed. The resulting actual cutting time will be anticipated compared to the Faustman optimal cutting time. If, alternatively, the equivalent constant rate of discount is the empirically observed discount rate, then the optimal cutting time is the same, but the present value of profits for the hyperbolic forest owner is always higher than the one resulting from the equivalent constant discount rate. All these results apply to both the single and the multiple rotation problems.