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Optimizing high-dimensional stochastic forestry via reinforcement learning

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  • Tahvonen, Olli
  • Suominen, Antti
  • Malo, Pekka
  • Viitasaari, Lauri
  • Parkatti, Vesa-Pekka

Abstract

In proceeding beyond the generic optimal rotation model, forest economic research has applied various specifications that aim to circumvent the problems of high dimensionality. We specify an age- and size-structured mixed-species optimal harvesting model with binary variables for harvest timing, stochastic stand growth, and stochastic prices. Reinforcement learning allows solving this high-dimensional model without simplifications. In addition to presenting new features in reservation price schedules and effects of stochasticity, our setup allows evaluating the simplifications in the existing research. We find that one- or two-dimensional models lose a high fraction of attainable economic output while the commonly applied size-structured matrix model overestimates economic profitability, yields deviations in harvest timing, including optimal rotation, and dilutes the effects of stochasticity. Reinforcement learning is found to be an efficient and promising method for detailed age- and size-structured optimization models in resource economics.

Suggested Citation

  • Tahvonen, Olli & Suominen, Antti & Malo, Pekka & Viitasaari, Lauri & Parkatti, Vesa-Pekka, 2022. "Optimizing high-dimensional stochastic forestry via reinforcement learning," Journal of Economic Dynamics and Control, Elsevier, vol. 145(C).
  • Handle: RePEc:eee:dyncon:v:145:y:2022:i:c:s0165188922002561
    DOI: 10.1016/j.jedc.2022.104553
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    Cited by:

    1. Laukkanen, Matti & Tahvonen, Olli, 2023. "Wood product differentiation in age-structured forestry," Resource and Energy Economics, Elsevier, vol. 73(C).

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    More about this item

    Keywords

    Artificial intelligence; Reinforcement learning; Forestry; Stochasticity; Curse of dimensionality; Optimal rotation; Natural resources;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry

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