Optimizing Forest Management: Balancing Environmental and Economic Goals Using Game Theory and Multi-Objective Approaches

Abstract

Forests are complex ecosystems that require integrated management to balance economic, social, and environmental dimensions. Conflicting objectives among stakeholders make optimal decision-making particularly challenging. This study seeks to balance the economic gains of forest harvesting with the goals of environmental conservation, with a focus on the Shafarood forest in Northern Iran. We applied multi-objective optimization and game theory to maximize the net present value (NPV) of forest harvesting while enhancing carbon sequestration. The research utilized data on stumpage prices, harvesting costs, tree density, volume per ha, growth rates, interest rates, carbon sequestration, and labour costs. Applying the epsilon-constraint method, we derived Pareto optimal solutions for a bi-objective model, and game theory was applied to negotiate between economic and environmental stakeholders. In the fifth round of bargaining, a Nash equilibrium was achieved between the two players. At this equilibrium point, the economic player achieved NPV from forest harvesting of 9001.884 (IRR 10,000/ha) and amount of carbon sequestration of 159.9383 tons/ha. Meanwhile, the environmental player achieved NPV from forest harvesting of 7861.248 (IRR 10,000/ha), along with a carbon sequestration of 159.9731 tons/ha. Results indicate significant trade-offs but reveal potential gains for both economic and environmental goals. These findings provide a robust framework for sustainable forest management and offer practical tools to support informed decision-making for diverse stakeholders.