Optimal exploitation of a renewable resource with stochastic nonconvex technology: An analysis of extinction and survival

This paper analyzes the possibilities of extinction and survival of a renewable resource whose technology of reproduction is both stochastic and nonconvex. In particular, the production function is subject to random shocks over time and is allowed to be nonconcave, though it eventually exhibits bounded growth. The existence of a minimum biomass below which the resource can only decrease, is allowed for. Society harvests a part of the current stock every time period over an infinite horizon so as to maximize the expected discounted sum of one period social utilities from the harvested resource. The social utility function is strictly concave. The stochastic process of optimal stocks generated by the optimal stationary policy is analyzed. The nonconvexity in the optimization problem implies that the optimal policy functions are not 'well behaved'. The behaviour of the probability of extinction (and the expected time to extinction), as a function of initial stock, is characterized for various possible configurations of the optimal policy and the technology. Sufficient conditions on the utility and production functions and the rate of impatience, are specified in order to ensure survival of the resource with probability one from some stock level (the minimum safe standard of conservation). Sufficient conditions for almost sure extinction and almost sure survival from all stock levels are also specified. These conditions are related to the corresponding conditions derived in models with deterministic and/or convex technology. 4 figs., 29 refs