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Transaction Evidence Appraisal: Competition in British Columbia's Stumpage Markets

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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; lumber trade; public forestlands

Document Type: Research Article

Publication date: August 1, 2006

More about this publication?
  • Forest Science is a peer-reviewed journal publishing fundamental and applied research that explores all aspects of natural and social sciences as they apply to the function and management of the forested ecosystems of the world. Topics include silviculture, forest management, biometrics, economics, entomology & pathology, fire & fuels management, forest ecology, genetics & tree improvement, geospatial technologies, harvesting & utilization, landscape ecology, operations research, forest policy, physiology, recreation, social sciences, soils & hydrology, and wildlife management.
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