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Abstract

Real option theory has for some decades been used in forest economics to analyse decision problems which involve irreversible and stochastic decisions. One such decision is when to harvest a stand and with what species to regenerate. The latter decision can be postponed for some time, making a species change possible if favoured by the value development or if regeneration of the present species is unsuccessful. This problem is analysed here as extension of the traditional two-option problem, by involving several stochastic elements.

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