Journal of Forest Economics > Vol 26 > Issue 1

Optimal rotation with differently-discounted benefit streams

Colin Price,
Suggested Citation
Colin Price (2017), "Optimal rotation with differently-discounted benefit streams", Journal of Forest Economics: Vol. 26: No. 1, pp 1-8.

Publication Date: 0/1/2017
© 0 2017 Colin Price
JEL Codes:Q230
Differential discount ratesOptimal rotationTerminal valuesNon-consumptive values


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In this article:
Differentiated discount rates 
The model 
Results with two different terminal benefits 
Continuous benefit 


The case is often now made that discount rates should decline with time. Underlying reasons include that some kinds benefit (or cost) might be discounted at a lower rate than that used for others: in particular, that rates for carbon values and environmental amenities might be less than that for timber. A lengthening sequence of rotations then arises, whether the benefits are consumptive ones realised at the rotation end, or non-consumptive ones whose annual value increases through the rotation. A timber discount rate lower than that for non-consumptive benefits leads to a shortening sequence of rotations. The results differ importantly from those of discounting all benefits and costs at a reducing rate through time.