Institute Of Recherches Economiques

IRENE, United States

Institute Of Recherches Economiques

IRENE, United States
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Farsi M.,Institute Of Recherches Economiques | Krahenbuhl G.,Institute Of Recherches Economiques
Schweizerische Zeitschrift fur Forstwesen | Year: 2015

This contribution performs a supply analysis of the Swiss forest enterprises. It explores the factors influencing the quantity of supply, and determines the behavioral characteristics of the forestry firms. Based on econometric methods, the main characteristics of the firms in this strongly heterogeneous and changing sector are taken into account. Overall, the results suggest that Swiss forestry firms are not acting as profit maximizers. In fact, at least some of them, namely the smaller ones, seem to strive for a certain level of revenues, allowing them to cover their current costs (the so-called target revenue model), irrespective of their market position. Specifically, estimations indicate a negative price elasticity of supply, i.e., the quantity of wood supplied decreases with increasing prices. The intensity of this reaction depends on firm characteristics, such as type of ownership (private or public) and the size of the enterprise. Moreover, the results point to the existence of market power among larger forestry firms, which might be used in price negotiations with sawmills and other buyers.

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