Transaction Evidence Appraisal: Competition in British Columbia's Stumpage Markets
Authors: Niquidet, Kurt1; van Kooten, G. Cornelis1
Source: Forest Science, Volume 52, Number 4, August 2006 , pp. 451-459(9)
Abstract:
As a potential resolution to the softwood lumber dispute, the US Department of Commerce recommends that administered stumpage prices in Canada be determined using information from competitive timber auctions. Previous research indicates that the degree of competition significantly influences bidding behavior. In this article, therefore, a truncated hedonic timber sale model was developed to investigate the influence of competition on stumpage markets in the interior of British Columbia. Results indicate that lower bids in several northern zones of the province are due, at least in part, to lack of competition, but that market power appears limited by spatial arbitrage. In one zone characterized by monopsony, we estimate bids are shaded below their true valuation by $12.56/m3, which approximates the calculated transportation costs ($14.90/m3) to an adjacent more competitive zone. Furthermore, the significance of the inverse mills ratio suggests that ordinary least-squares regression leads to biased estimates. Our findings have policy implications for the future development and use of transaction evidence appraisal models as a potential solution to the long-standing softwood lumber trade dispute.Keywords: Timber auctions; public forestlands; lumber trade
Document Type: Research article
Affiliations: 1: Kurt Niquidet, School of Forestry, Department of Engineering, University of Canterbury, Private Bag 4800, Christchurch 8020, New Zealand—Phone: +64-3-364-2987 (ext. 8521); kurt.niquidet@canterbury.ac.nz. G. Cornelis van Kooten, Department of Economics, University of Victoria, PO Box 1700, Stn CSC, Victoria, British Columbia V8W 2Y2, Canada—Phone: (250) 721-8539; kooten@uvic.ca.
