Value of quality information of Scots pine stands in timber bidding

In any decision-making situation under uncertainty, the decision-maker can either choose between different alternatives with the current information or reduce the uncertainty by collecting more information. The value of the information can be defined as the difference between the expected value of an activity with and without the information. We examined the value of additional information in a case of competitive bidding for a given block of timber. Our main focus was on the uncertainty of roundwood quality, and volume was assumed to be known with certainty. The uncertainty of quality was described with the uncertainty of dimensions of living and dead crown. The prior information concerning the crown dimensions was obtained from statistical models or from an assumed uniform distribution. The value of each tree was calculated by predicting the proportions of different lumber grades and by-products as a function of the dimensions of the stem and the crown. The results showed that, if only uniform distribution was available as prior information, the quality information had a high value for the timber buyer. However, if the prior information from the statistical models was used, investing in quality information was profitable only for the stands with the highest volume.