The study presents a theory of utility models based on aspiration levels, as well as the application of this theory to the planning of timber flow economics. The first part of the study comprises a derivation of the utility-theoretic basis for the application of aspiration levels. Two basic models are dealt with; the additive and the multiplicative. Applied here solely for partial utility functions, aspiration and reservation levels are interpreted as defining piecewisely linear functions. The standpoint of the choices of the decision-makers is emphasized by the use of indifference curves. The second part of the study introduces a model for the management of timber flows. The model is based on the assumption that the decision-maker is willing to specify a shape of income flow which is different from that of the capital-theoretic optimum. The utility model comprises four aspiration-based compound utility functions.
The theory and the flow model are tested numerically by computations covering three forest holdings. The results show that the additive model is sensitive even to slight changes in relative importance and aspiration levels. This applies particularly to nearly linear production possibility boundaries of monetary variables. The multiplicative model, on the other hand, is stable because it generates strictly convex indifference curves. Due to a higher marginal rate of substitution, the multiplicative model implies a stronger dependence on forest management than the additive function. For income trajectory optimization, a method utilizing an income trajectory index is more efficient than one based on the use of aspiration levels per management period. Smooth trajectories can be attained by squaring the deviation of the feasible trajectories from the desired one.
The investigation examines the development potential of small sawmills in rural Finland. Development is defined with qualitative bias, given small sawmills’ limited possibilities for large-scale investments. Potential is defined in terms of the behavioural limitations to development. The investigation assumes that small sawmill entrepreneurial behaviour is essentially satisficing, and that the concept of bounded rationality is applicable. The empirical material concerns a random sample of 399 sawmills from all regions in Finland collected in connection with the 1990 small sawmill inventory.
Three sets of enterprise/entrepreneurial attributes are constructed using principal component analyses: i) entrepreneurial skills & organization, ii) small sawmill outlets, and iii) information attributes. Development potential is measured by employing discriminant analyses to test these attributes against four a priori sawmill classifications: i) sawmill production structure, ii) entrepreneurial development intentions, ii) sawmill operating environments, and iv) sawmilling as a livelihood. Each of these analyses contributes to an understanding of the entrepreneur-enterprise dialectic.
Based on the use of Pred’s behavioural matrix, small sawmill entrepreneurs’ quantity & quality of information and their ability to use information are examined with respect to sawmill typologies. In this way, the entrepreneur-enterprise dialectic is given a third dimension, that of the entrepreneurs’ partial space. The analysis is therefore able to examine development potential from the standpoint of an entrepreneur-enterprise-environment (partial space) trialectic.
The PDF includes a summary in Finnish.