Economic Harvesting of Uneven-Aged Northern Hardwood Stands Under Risk: A Markovian Decision Model

Abstract

A method is presented to determine economic harvesting policies for northern hardwood stands, taking into account uncertain stand growth and prices. The method used a transition matrix giving the probability of a stand and market state in five years, given the current stand and market state. Stand states were defined by the basal area of trees in three timber sizes. Market states were defined by timber price levels. The transition probabilities were computed by simulation, using a stochastic model of northern hardwoods and the probability distribution of prices in Wisconsin. A method of successive approximations was used to find the harvesting policy that would maximize the expected net discounted value of returns from a stand over an infinite horizon. The solution also gave the expected stand value, including land. The best management policy prescribed a specific harvest for each possible stand and market state. A sensitivity analysis was done of the effects of changes in discount rate, fixed costs, and transition probabilities on the best policy and the expected cutting cycle. For. Sci. 33(4):889-907.