Market structure and market power the case of the Swedish forest sector

University dissertation from Umeå : Umeå universitet

Abstract: The Swedish forest sector is analyzed, using methods drawing on traditional (forest) market analysis and industrial organization literature. Models based on economic theory are tested empirically with time-6eries data.Paper [1] deals with how the pulp and paper industry manages wood supply risk. It appears as if the import of wood is not counter-cyclical to the domestic supplies of wood. Instead, the inventory is used to absorb unexpected shifts in supply.In paper [2], the supply behaviour is compared between different categories of forest owners. The supply elasticities with respect to prices are found to be much smaller in this study, which is based on quantities of thinning wood and final felling wood, than in other studies using pulpwood and sawtimber quantities. Only small differences are found between owner categories.Paper [3] attempts to estimate parametrically the market power (the ‘markdown’) of the assumedlv monopsonistic pulp and paper industry, using a restricted Generalized Leontief (GL) profit function to model the production structure. The hypothesis of a competitive market can be rejected, when the alternative hypothesis is a variable degree of market power.Paper [4] clarifies some notions raised by the use of the restricted GL profit function. A specification of the profit fuction is proposed, where linear homogeneity in the fixed factor is nested in the non-homogeneous case.The final paper [5] explores the weakening of a natural resource monopsony’s market power, if time-consistency (or subgame-perfection) is required in a two- period model. The analysis resembles that of a monopoly selling a durable good (Coase conjecture). The monopsony does loose market power, but its position is strengthened if the resource is renewable or if it grows between periods.