Risk aversion and optimal management of an uneven-aged forest under risk of windthrow: A Markov decision process approach

Forests are increasingly threatened by windthrows but those composed of uneven-aged stand plots are generally less impacted by their effects. As a consequence, the management of such forests should be based on a joint management of all their different uneven-aged stand plots. This article determines the optimal management regime of uneven-aged forests under risk of windthrow and furthermore takes the risk preferences of the forest owner into account. This study analyzes optimal harvesting of uneven-aged stand plots by applying a Markov decision process (MDP) framework using an economic description of uneven-aged forestry. Two management types are considered: the joint uneven-aged forest management model in which the forest owner jointly manages all the different stand plots, and the independent uneven-aged forest management model that assumes that the forest owner independently manages each plot of the forest. The MDP framework is applied to a non-industrial private forest owner located in northeastern France. First, we show that the forest owner tends to converge toward a forest structure that is close to a normal forest in the joint uneven-aged forest management model. Second, we find that the independent uneven-aged forest management model poorly approximates the optimal multi-stand harvesting policy. Third, and more surprisingly, the levels of windthrow probability changes considered have little influence on the optimal harvesting strategies of the forest owner. Lastly, in contrast, the forest owner's risk aversion is shown to have a strong influence on the optimal policy. (C) 2016 Department of Forest Economics, Swedish University of Agricultural Sciences, Umea. Published by Elsevier GmbH. All rights reserved.