Risk and uncertainty in forest resources decision making

Risk has been an important topic in forest economics since the early 1980s. This chapter will address problems of risk, although problems of pure uncertainty will be discussed as a future research area. We will survey the problems, models, and results from the literature, focusing more on how problems have been approached, the assumptions under which these problems have been studied, and the types of results that have been found. The discussion is separated into three parts. First, there are cases in which forest stands, once established, are subject to the arrival of natural or catastrophic natural events such as fire or disease that may occur before trees are harvested. Second are cases in which future market parameters are unknown and landowners must make land-use or forest management decisions in the present. And finally, we discuss key opportunities for future work regarding realistic situations and risks faced by forest landowners.