IDEAS home Printed from https://ideas.repec.org/a/eee/forpol/v137y2022ics138993412200003x.html
   My bibliography  Save this article

Perfect assumptions in an imperfect world: Managing timberland in an oligopoly market

Author

Listed:
  • Kanieski da Silva, Bruno
  • Tanger, Shaun
  • Marufuzzaman, Mohammad
  • Cubbage, Frederick

Abstract

We built a game-theoretic supply model where forest landowners respond to each other's decisions using two market assumptions: (i) Perfect cartel, (ii) Cournot competition (simultaneous moves) and (iii) Stackelberg competition (sequential moves). Our findings indicate that the initial forest structure is instrumental in determining forest composition outcomes among suppliers. The solutions in the Cournot model, landowners with the same initial forest structure have uniform outcomes with increased variation in financial performance arising with different initial endowments of pulpwood and sawtimber and establishment costs. Alternatively, Stackelberg leadership has profound financial benefits to leaders even under similar initial conditions, that remain regardless of scenario. However, while terminal overall forest composition was similar regardless of scenario under Cournot outcomes, the same is not true under Stackelberg. We find that Stackelberg outcomes led to the follower being unable to harvest younger age classes over time, which resulted in accumulation of older age class stands. Our results elucidate the importance of diversification and policies that reduce landownership land concentration.

Suggested Citation

  • Kanieski da Silva, Bruno & Tanger, Shaun & Marufuzzaman, Mohammad & Cubbage, Frederick, 2022. "Perfect assumptions in an imperfect world: Managing timberland in an oligopoly market," Forest Policy and Economics, Elsevier, vol. 137(C).
  • Handle: RePEc:eee:forpol:v:137:y:2022:i:c:s138993412200003x
    DOI: 10.1016/j.forpol.2022.102691
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S138993412200003X
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.forpol.2022.102691?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Zhou, Mo & Buongiorno, Joseph, 2011. "Effects of stochastic interest rates in decision making under risk: A Markov decision process model for forest management," Forest Policy and Economics, Elsevier, vol. 13(5), pages 402-410, June.
    2. repec:bla:scandj:v:91:y:1989:i:4:p:689-704 is not listed on IDEAS
    3. Baldwin, Laura H & Marshall, Robert C & Richard, Jean-Francois, 1997. "Bidder Collusion at Forest Service Timber Sales," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 657-699, August.
    4. Mei, Bin & Sun, Changyou, 2008. "Assessing Time-Varying Oligopoly and Oligopsony Power in the U.S. Paper Industry," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(3), pages 1-13, December.
    5. J. Garcia-Gonzalo & T. Pukkala & J. Borges, 2014. "Integrating fire risk in stand management scheduling. An application to Maritime pine stands in Portugal," Annals of Operations Research, Springer, vol. 219(1), pages 379-395, August.
    6. Laurence Reeves & Robert Haight, 2000. "Timber harvest scheduling with price uncertainty using Markowitz portfolio optimization," Annals of Operations Research, Springer, vol. 95(1), pages 229-250, January.
    7. Benoît Colson & Patrice Marcotte & Gilles Savard, 2007. "An overview of bilevel optimization," Annals of Operations Research, Springer, vol. 153(1), pages 235-256, September.
    8. A. Tsoukalas & A. Mitsos, 2014. "Multivariate McCormick relaxations," Journal of Global Optimization, Springer, vol. 59(2), pages 633-662, July.
    9. Murray, Brian C, 1995. "Measuring Oligopsony Power with Shadow Prices: U.S. Markets for Pulpwood and Sawlogs," The Review of Economics and Statistics, MIT Press, vol. 77(3), pages 486-498, August.
    10. Silva, Bruno Kanieski & Cubbage, Frederick W. & Gonzalez, Ronalds & Abt, Robert C., 2019. "Assessing market power in the U.S. pulp and paper industry," Forest Policy and Economics, Elsevier, vol. 102(C), pages 138-150.
    11. Philip A. Haile, 2001. "Auctions with Resale Markets: An Application to U.S. Forest Service Timber Sales," American Economic Review, American Economic Association, vol. 91(3), pages 399-427, June.
    12. Susan Athey & Jonathan Levin, 2001. "Information and Competition in U.S. Forest Service Timber Auctions," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 375-417, April.
    13. Mei, Bin & Sun, Changyou, 2008. "Assessing Time-Varying Oligopoly and Oligopsony Power in the U.S. Paper Industry," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 40(3), pages 927-939, December.
    14. Safarzadeh, Soroush & Rasti-Barzoki, Morteza, 2019. "A game theoretic approach for pricing policies in a duopolistic supply chain considering energy productivity, industrial rebound effect, and government policies," Energy, Elsevier, vol. 167(C), pages 92-105.
    15. Reeson, Andrew F. & Rodriguez, Luis C. & Whitten, Stuart M. & Williams, Kristen & Nolles, Karel & Windle, Jill & Rolfe, John, 2011. "Adapting auctions for the provision of ecosystem services at the landscape scale," Ecological Economics, Elsevier, vol. 70(9), pages 1621-1627, July.
    16. Lauer, Christopher J. & Montgomery, Claire A. & Dietterich, Thomas G., 2017. "Spatial interactions and optimal forest management on a fire-threatened landscape," Forest Policy and Economics, Elsevier, vol. 83(C), pages 107-120.
    17. Jussi Uusivuori & Jari Kuuluvainen, 2005. "The Harvesting Decisions When a Standing Forest with Multiple Age-Classes Has Value," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(1), pages 61-76.
    18. Sotirov, Metodi & Sallnäs, Ola & Eriksson, Ljusk Ola, 2019. "Forest owner behavioral models, policy changes, and forest management. An agent-based framework for studying the provision of forest ecosystem goods and services at the landscape level," Forest Policy and Economics, Elsevier, vol. 103(C), pages 79-89.
    19. Bai, Yun & Ouyang, Yanfeng & Pang, Jong-Shi, 2012. "Biofuel supply chain design under competitive agricultural land use and feedstock market equilibrium," Energy Economics, Elsevier, vol. 34(5), pages 1623-1633.
    20. Brodrechtova, Yvonne, 2015. "Economic valuation of long-term timber contracts: Empirical evidence from Germany," Forest Policy and Economics, Elsevier, vol. 55(C), pages 1-9.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Farnia, Farnoush & Frayret, Jean-Marc & LeBel, Luc & Beaudry, Catherine, 2013. "Multiple-round timber auction design and simulation," International Journal of Production Economics, Elsevier, vol. 146(1), pages 129-141.
    2. Jonathan B. Hill & Artyom Shneyerov, 2009. "Are There Common Values in BC Timber Sales? A Tail-Index Nonparametric Test," Working Papers 09003, Concordia University, Department of Economics.
    3. Susan Athey & Jonathan Levin & Enrique Seira, 2011. "Comparing open and Sealed Bid Auctions: Evidence from Timber Auctions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(1), pages 207-257.
    4. Hill, Jonathan B. & Shneyerov, Artyom, 2013. "Are there common values in first-price auctions? A tail-index nonparametric test," Journal of Econometrics, Elsevier, vol. 174(2), pages 144-164.
    5. Jingfeng Lu & Isabelle Perrigne, 2008. "Estimating risk aversion from ascending and sealed-bid auctions: the case of timber auction data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(7), pages 871-896.
    6. Silva, Bruno Kanieski & Cubbage, Frederick W. & Gonzalez, Ronalds & Abt, Robert C., 2019. "Assessing market power in the U.S. pulp and paper industry," Forest Policy and Economics, Elsevier, vol. 102(C), pages 138-150.
    7. Mydland, Ørjan & Størdal, Ståle & Kumbhakar, Subal C. & Lien, Gudbrand, 2022. "Modeling markups and its determinants: The case of Norwegian industries and regions," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 252-262.
    8. Daniel Rondeau & Pascal Courty & Maurice Doyon, 2016. "Simultaneous Allocation of Bundled Goods through Auctions: Assessing the Case for Joint Bidding," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(3), pages 838-859.
    9. Farnia, Farnoush & Frayret, Jean-Marc & Beaudry, Catherine & Lebel, Luc, 2015. "Time-based combinatorial auction for timber allocation and delivery coordination," Forest Policy and Economics, Elsevier, vol. 50(C), pages 143-152.
    10. Koppenberg, Maximilian & Hirsch, Stefan, 2020. "Comparing methods for markup estimation with an application to EU food retailing," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304272, Agricultural and Applied Economics Association.
    11. Li, Tong, 2010. "Indirect inference in structural econometric models," Journal of Econometrics, Elsevier, vol. 157(1), pages 120-128, July.
    12. Philip A. Haile & Elie Tamer, 2003. "Inference with an Incomplete Model of English Auctions," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 1-51, February.
    13. Susan Athey & Jonathan Levin & Enrique Seira, 2004. "Comparing Open and Sealed Bid Auctions: Theory and Evidence from Timber Auctions," Levine's Bibliography 122247000000000524, UCLA Department of Economics.
    14. Susan Athey & Philip A. Haile, 2006. "Empirical Models of Auctions," NBER Working Papers 12126, National Bureau of Economic Research, Inc.
    15. Tatoutchoup, Francis Didier, 2017. "Forestry auctions with interdependent values: Evidence from timber auctions," Forest Policy and Economics, Elsevier, vol. 80(C), pages 107-115.
    16. Simona BIGERNA & Carlo Andrea BOLLINO & Maria Chiara D'ERRICO & Paolo POLINORI, 2015. "Competitive Equilibrium in the Italian Wholesale Electricity Market," Working papers of the Department of Economics - University of Perugia (IT) 0017/2015, Università di Perugia, Dipartimento Economia.
    17. Nathalie Gimenes, 2014. "Econometrics of Ascending Auctions by Quantile Regression," Working Papers, Department of Economics 2014_25, University of São Paulo (FEA-USP).
    18. Mei, Bin, 2019. "Timberland investments in the United States: A review and prospects," Forest Policy and Economics, Elsevier, vol. 109(C).
    19. An, Yonghong, 2017. "Identification of first-price auctions with non-equilibrium beliefs: A measurement error approach," Journal of Econometrics, Elsevier, vol. 200(2), pages 326-343.
    20. Pasha Andreyanov & El Hadi Caoui, 2022. "Secret reserve prices by uninformed sellers," Quantitative Economics, Econometric Society, vol. 13(3), pages 1203-1256, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:forpol:v:137:y:2022:i:c:s138993412200003x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/forpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.