Graduate Thesis Or Dissertation

 

Primal and dual models of market power : an application to Eastern Oregon's lumber and stumpage markets Public Deposited

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  • The first objective of this research is to develop primal and dual models of firm behavior that incorporate firms' conjectures of their market power positions. The second is to empirically test for the presence of market power in eastern Oregon's stumpage and lumber markets. Eastern Oregon was chosen since it has historically been a relatively self-supplied stumpage region, mostly from public lands, and because much of the supply contains tree species that possess characteristics that allow for the production of unique products. Additionally, supply will likely increase in the future as public land management agencies implement plans to restore ecosystem health to the region. The model development and estimation methods use the procedures of the relatively new discipline called the "new empirical industrial organization" (NEIO). NEIO uses theoretical results of profit maximizing behavior to econometrically estimate the amount by which industry behavior deviates from perfect competition. In particular, this research utilizes input and output shadow prices to derive firms' conjectural elasticities, which are then directly estimated using nonlinear two-stage and three-stage least squares. The results of the empirical estimations, although not conclusive, indicate that competitive market outcomes can not be rejected in eastern Oregon's lumber and stumpage markets. The results are as hypothesized for the output market and are consistent with prior studies of Pacific Northwest stumpage markets. Care should be taken however, in interpreting the results. Since annual time series data are used the results are averages over the estimation period. If the competitive behavior in the markets is changing the results may not capture the latest structure. Additionally, since logs have historically been processed near to where they have grown, an area the size of eastern Oregon may contain numerous supply areas. The estimation results are the average behavior of all the markets. The industry-level data also requires restrictive assumptions on firm behavior. A preferred analysis would use firm-level data, which would likely decrease the standard errors and provide more consistent results.
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