The Choice among Sales Mechanisms: Auction v. Negotiated Sales of Private Timber

Abstract

For many non-industrial private forest (NIPF) landowners, the standing timber on their property is an important component of their investment portfolios. The value of their timber is determined not only by the biological and physical attributes of their timber tracts, but also by the transaction costs associated with different contracting practices, pricing schemes, and sales mechanisms. In this paper, we examine the determinants of the choice by landowners between the two predominant sales mechanisms for selling standing timber—auctions and negotiations. Our examination provides industry participants with a framework for thinking about the benefits and costs of the choice between these two alternatives. Further, it provides them with information on empirical relationships among sales mechanisms and their determinants. We also discuss potential implications of our results for the USDA Forest Service (Forest Service), which is required to sell almost all of its tracts through auctions.