Multiple risks in multi-objective forest planning: integration and importance

Abstract

Multiple risks were integrated in multi-objective forest planning with the scenario technique and with an application of multi-attribute utility theory. The sources of risks were divided into three categories: risks related to inventory data, risks arising from unknown future states of nature, and risks associated with the decision maker's preferences. Stochastic models and other procedures for producing scenarios of inventory data, growth rate, mortality and natural regeneration of trees, success of tree planting, timber prices, cost level, and importance of management objectives are described. Some of the models for the scenarios were based on empirical data and obtained from earlier investigations, while others were specified by parameters given by the decision maker. The decision maker's attitude toward risk was integrated in planning via the distribution of a utility index. The utility index was computed from an additive utility function. Cumulative points of the distribution were weighed in a manner reflecting decision maker's risk preferences. The weighed utility index was used as the ultimate criterion when searching for the optimal plan. Optimization was done using a heuristic algorithm. The case study conducted indicated that both risks and attitude toward risks affect the choice of plan; optimal plans produced by a deterministic system were different from the stochastic optima, and a risk-neutral decision maker had optima different from those of risk-averse and risk-seeking decision makers. Depending on the decision maker's attitude toward risk, utility losses ranging from 0.1% to 4.5% were to be expected when the deterministic optimum was selected. Implementing a risk-neutral decision maker's optimal plan caused utility losses less than 3.5% for risk-averse and risk-seeking decision makers.