Cooperative and Non-Cooperative Solutions in a Dynamic Model of Forest Management

This study develops a finite-horizon optimal control model linking forest biomass, biodiversity, cumulative extraction, and stochastic disturbance shocks to assess three governance regimes: non-cooperative management with free terminal states (OLNE-Free) and two cooperative approaches - one with fixed ecological targets (Regulator-Fixed) and another with flexible endpoints (Regulator-Free). Non-cooperative harvesters prioritize short-term extraction, overlooking biodiversity's contribution to productivity and allowing extraction to accumulate. In contrast, cooperative regimes internalize ecological values and dynamically adjust harvest effort, resulting in improved ecological and economic outcomes. Cooperative management moderates harvesting intensity, enhances biodiversity, and increases overall welfare compared to non-cooperative approaches. Implementing mechanisms - such as fees, taxes, or regulations - that align private incentives with social values helps decentralize cooperation and buffers outcomes against parameter variability. Sensitivity analysis demonstrates that cooperative regimes consistently influence ecological changes and tend to promote more stable long-term dynamics. These findings highlight the critical role of biodiversity valuation and flexible cooperation in advancing sustainable forest management amid ecological and economic indeterminacies.