| Abstract: | ABSTRACT. Deforestation caused by concession logging is often the result of harvest decisions which focus on short-run profits rather than on long-run sustainable harvest yields. A sequential-decision model of this type of behavior is here developed which focuses on a logger's annual decisions of whether or not to remain in compliance with the terms of a concession contract. The contract stipulates harvesting procedures for a sustained forest yield, and noncompliance is taken to result in deforestation. An optimal decision policy for the concession logger is characterized in terms of optimal-stopping theory, and is employed to construct payoff incentives which encourage compliance. In particular, a forest management problem is formulated which focuses on the effectiveness of partial inspection policies in deterring noncompliant behavior. General necessary and sufficient conditions for the effectiveness of such policies are established, and are given a more operational form for the Markov case. A numerical example based on actual concession-contract data is also developed which suggests certain policy implications. |
