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Timber Auctions

Timber Auctions. Kurt Niquidet. Background/Research Motivation. 95% of forest land base in Canada owned by public. Timber harvesting rights granted to private companies through long term tenures. Charges for cutting timber administered via a pricing formula.

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Timber Auctions

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  1. Timber Auctions Kurt Niquidet

  2. Background/Research Motivation • 95% of forest land base in Canada owned by public • Timber harvesting rights granted to private companies through long term tenures. Charges for cutting timber administered via a pricing formula • US claims this formula does not collect resource rents and subsidizes the Canadian timber industry. 27% CVD since 2001 – US$ 5 Billion thus far. • Resolution to dispute proposed by US DOC – Auction timber

  3. British Columbia Market Pricing System (MPS) • Auction 20% of timber (first price sealed bid auction) and use as a basis for pricing non-auctioned tenures • Hedonic Pricing Model – Known as transaction evidence appraisal • Potential competition issues. Timber is low valued/unit weight. Creates regional markets which are concentrated.

  4. Existing model Bid Equation • function of timber tract characteristics such as tree size, species, slope of site, Distance to nearest processing facility • Number of Bidders which is endogenous. In some cases no bidders (truncated model) Number of bidders equation • regional dummy variables, reserve price, bid preparation costs

  5. Future research and issues Improve the hedonic model • enrich the number of bidders entry decision. Need more spatial data. Location of timber relative to all potential bidders. • Get “no-bid data“ – Heckman model? • Panel Model? Uses • Set appropriate reservation prices • Map extensive and intensive margins

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