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Risk aversion and risk seeking in multicriteria forest management: a Markov decision process approachAuthor(s): Joseph Buongiorno; Mo Zhou; Craig Johnston
Source: Canadian Journal of Forest Research
Publication Series: Scientific Journal (JRNL)
Station: Southern Research Station
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DescriptionMarkov decision process models were extended to reflect some consequences of the risk attitude of forestry decision makers. One approach consisted of maximizing the expected value of a criterion subject to an upper bound on the variance or, symmetrically, minimizing the variance subject to a lower bound on the expected value. The other method used the certainty equivalent criterion, a weighted average of the expected value and variance. The two approaches were applied to data for mixed softwood-hardwood forests in the southern United States with multiple financial and ecological criteria. Compared with risk neutrality or risk seeking, financial risk aversion reduced expected annual financial returns and production and led to shorter cutting cycles that lowered the expected diversity of tree species and size, stand basal area, stored CO2e, and old-growth area.
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CitationBuongiorno, Joseph; Zhou, Mo; Johnston, Craig. 2017.Risk aversion and risk seeking in multicriteria forest management: a Markov decision process approach. Canadian Journal of Forest Research. 47(6): 800-807. https://doi.org/10.1139/cjfr-2016-0502.
Keywordsuneven-aged management, risk aversion, economics, multiple criteria. Markov decision process, quadratic programming
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