PS5 - EEP101/ECON125 Spring 99 Prof D Zilberman TAs...

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EEP101/ECON125 Spring 99 Prof. D. Zilberman TA’s: Malick/Marceau PROBLEM SET 5 Due Monday May 10, in your TA’s mailbox 1. Controlled dehorning of rhinos has been proposed as a way of reducing poaching and raising income for wildlife management programs in Africa. Milner-Gulland et al. (1992) 1 calculated the optimal frequency at which to crop African rhinos. This exercise is a simplified version of their model. They found that the growth of a rhinos horn obeys the equation 3 87 . 0 ) 8 . 0 1 ( 3 ) ( t e t Q - - = where Q(t) is the mass in kg after t years. It costs $960 to remove a 3 kg horn and the price is $750 per kg. Interest rates in African countries tend to be quite high, around 10% - 30%. (a) Using the single rotation forestry model (no replanting) and an interest rate of 10%, determine how long a rhino horn should be allowed to grow before removing it. (b) The authors actually argue that “the optimum rotation period will not usually exceed 3 years”. (i) What factor(s) would shorten the optimal rotation time to something less than what you calculated in part (a)? (Hint: Rhino horn will regrow rather quickly once it is cut.) (ii) What factor(s) might explain more frequent dehorning in reality?
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