Illegal logging is a very serious problem for plantation management in tropics. Here we study the profit-sharing and agroforestry as management strategies.

Owner chooses the age of trees to cut, and the workers choose their monitoring effort to prevent illegal logging.

We derived two recursive formulas for the values of a site with trees of age t to the owner and to the workers. After the trees were removed, either by cutting, physical disturbances, or illegal logging, the owner hires workers to replant young trees. While trees are young, the land is also used as agriculture. In addition, the owner may share a fraction of profit obtained by selling logs with the workers. Illegal logging may be prevented by hiring forest guards or by monitoring effort of the workers.

Results are: (1) As the fixed cost of harvesting increases, the foresters delay the tree harvesting age. (2) If the discount rate is high, the foresters may use the land for continual agriculture by cutting trees at their young ages. (3) Under the presence of illegal logging pressure, the owner may find it profitable to share the income with the workers to solicit their monitoring efforts.

We discuss policy implications of these results.