ABSTRACT
This chapter challenges common assumptions about convexity in forest rotation models which optimize timber plus nontimber benefits. If a local optimum occurs earlier than the globally optimal age, policy based on marginal incentives may achieve suboptimal results. Policy-relevant nonconvexities are more likely if nontimber benefits dominate for young stands while the optimal age depends primarily on timber benefits, or nontimber benefits dominate for mature stands and also determine the optimal age. Nonconvexities may create either temporary or persistent difficulties. Policymakers may improve efficiency by exploiting the relationship between the timber-only optimum and the global optimum. With an indefinite planning horizon, the forest manager weighs the benefits of the current rotation against the opportunity costs of delaying benefits from each future rotation. As in pollution control problems, nonconvexities may or may not be policy relevant, depending on the relationship between the no-policy equilibrium and the globally efficient equilibrium.
