Optimal harvesting of a regime-switching stochastic growing renewable resource: A Utility Theory Approach

Abstract : In this paper, following Smith (1978) and Ludwig (1979), we examine the optimal rate of extraction from a stochastically regime-switching growing resource stock (typically to maximize the expected flow of utility from net revenue). Assuming a continuous-time stochastic regime switching for the biomass Gilpin-Ayala growth function, and CRRA utility function for firms preferences, we find the optimal extraction rate that maximizes the expected integral of the utility function of net revenue of firms.