Faustmann's Rule of Optimal Rotation

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The German forester Martin Faustmann solved the rotation problem, maximizing the present value of the income stream for forest rotation. The optimal solution is expressed by , where is the optimal rotation period, is the unit profit of harvesting, and δ is the discount rate. Since a new forest stand cannot be planted before cutting down the previous one, land area becomes a scarce good and the optimal rotation period will be shorter than the time period maximizing the present value for a single stand.

Contributed by: Arne Eide (January 2014)
Open content licensed under CC BY-NC-SA


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