ABSTRACT
Soil is usually considered as a renewable resource for dynamic crop and production management decision problems. For peatland, however, soil should be regarded as an exhaustible resource. This paper determines the optimal utilization of peatland for agricultural production within a dynamic context and it also presents an empirical study where the quasirent function is convex in the input and not concave as assumed in many economic studies. As a result of this convexity a corner solution is obtained. Moreover, the study demonstrates that there is only a slight difference between short- and farsighted behavior, and that both lead ultimately to an accelerated exhaustion of the resource. Private optimization leads to intensive use of the peat in the production of high value crops, which depletes the peat in a relatively short period of time. However, peatland also posseses a value as an environmental asset. The study provides a benchmark for the decision as to whether to convert peatland into productive agricultural land or to conserve it.
