Forest land value and rotation with an alternative land use

Abstract

We solve Faustmann's problem when the land manager plans to switch from the current tree species to some alternative species or land use. Such situations occur when the value of the alternative increases relative to the value of the species currently in place. The paper characterizes the land value function and the optimum rotations, highlighting the differences between this non-autonomous problem and the traditional Faustmann problem. We show that, from one harvest to the next until the switch, rotations can be constant and equal to the Faustmann rotation, or increasingly higher than the Faustmann rotation, or decreasingly lower. In the last two situations, the higher the number of previous harvests of the currently planted species before the switch to the alternative use, the closer the last rotation is to the Faustmann rotation.