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A Hotelling-Faustmann Explanation of the Structure of Christmas Tree Prices

Tomislav Vukina, Christiana E. Hilmer and Dean Lueck
American Journal of Agricultural Economics
Vol. 83, No. 3 (Aug., 2001), pp. 513-525
Stable URL: http://www.jstor.org/stable/1245083
Page Count: 13
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A Hotelling-Faustmann Explanation of the Structure of Christmas Tree Prices
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Abstract

We examine the relationship between a tree price and a tree age (height) using a Hotelling-Faustmann type model of optimal plantation management, which accounts for the possibility of replanting and biological growth. The model predictions are tested using the data on Christmas tree prices in North Carolina collected in December 1997. The estimates show that, in general, the rates of change in prices between adjacent age cohorts reflect a competitive equilibrium in the capital market thus supporting the Hotelling-Faustmann paradigm.

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