Timber harvesting strategy when both administrative and thinning costs are considered.
With the increase in social concern about ecological conservation and natural environment, the administrative cost that a forest firm bears increases. For example, the firm may share with government agencies the costs for surveillance and monitoring activities to detect non-native invasive species such as Gypsy moth, Asian long-horned beetle, and Emerald ash borer. The magnitude of the firm's expenditure on such costs would increase with the increase in the biomass of a forest stand on a given parcel of land. I shall call this type of expenditure the variable administrative cost. Considering such costs together with thinning costs, I first construct a continuous-time dynamic timber harvesting model and then use it to derive the characteristics of the optimal timber harvest schedule that consists of planting, thinning, clearcutting, and rotation. After that, by use of the characteristics, a computer optimization procedure for solving the model is devised and a computer program materializing it is applied to a practical example to illustrate the effect of the relative difference between the net revenue per unit harvest by thinning and that by clearcutting on the optimal timber harvest schedule for each case where variable administrative costs are present or not.