Investment and harvest strategies of the Finnish forest sector under different forest-tax policies: A differential game approach with computer-based decision aid

This study deals with the simultaneous solution of the investment, harvest, and taxation problems of the Finnish forest sector. These strategic questions involve competitive and contradictory interests among forestry, the forest industry, and society. The authors build a computer-based decision aid to support a decision maker who wants to analyze the consequences of different forest-tax policies. It is essential to this computational approach that only minor mathematical manipulations are needed to produce equilibrium open-loop Nash harvest and investment strategies. Moreover, as a differential-game approach it allows us to study the tax incidence. The authors solve the present model under three alternative tax policies: lump-sum, unit, and yield taxes.