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Faustmann's Rule of Optimal Rotation

​
time
200
discount rate
0.02
rotation period
50
select rotation period
maximize single yield
optimize single stand
optimal rotation
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
V'(
*
t
)/V(
*
t
)=δ/(1-
-δt
e
)
, where
t
is the optimal rotation period,
V(t)
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.
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