Dam decommissioning with stochastic salvage value

Reservoirs are one of the most common forms of nonrenewable resources, yet their economic studies have been rare. Years after large dams were built en masse, engineering literatures began to realize that even when reservoirs were structurally sustainable, they would nevertheless become unsustainable for reasons such as sedimentation accumulation. The loss of storage due to sediment accumulation is nontrivial and alarming. Our goal in this paper is to formally represent the reservoir management problem, taking into account the stochastic nature of salvage value of the dam at the time of its decommissioning.