Economic valuation of long-term timber contracts: Empirical evidence from Germany

Yvonne Brodrechtova

Forest Policy and Economics, 2015, vol. 55, issue C, 1-9

Abstract: The forest timber product economy has recently faced challenges that include: increasing competition between the timber and energy markets for available resources, changing demand for timber, and wood-processing over capacities. It has been observed throughout Europe and in Germany specifically, that often long-term timber contracts have been negotiated to cope with these challenges and problems concerning the exchange of timber. However, the use, and economic value of, long-term timber contracts have not been rationalized yet even where trade involves little or no specific investments. The economic explanation for the use of long-term timber contracts is therefore sought within the theoretical framework based on the insights of transaction cost theory. The presented case study on Germany used 68 semi-structured interviews with forest enterprises and sawmills represented by 71 individual decision makers. The interviews have been analyzed with a content analysis. The results show that motivation for the use of long-term timber contracts was not always based upon transaction cost advantage or upon significant investments, but also upon cost-economizing rationale such as that which occurs with the bundling of timber volume by allowing for efficient price adjustment. The tradeoff of flexibility and hazards of being bound in long-term timber contracts was the consequence.

Keywords: Transaction cost theory; Long-term contracts; Timber trade; Germany (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:forpol:v:55:y:2015:i:c:p:1-9

DOI: 10.1016/j.forpol.2015.03.003

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