An analysis of bidding behavior at U.S. Forest Service timber auctions

Abstract

The Forest Service is mandated to receive a "fair market value" for its timber. Noncompetitive bidding may lead to lower than fair market values of timber and thus large losses in federal revenues. Knowing where noncompetitive bidding is most likely to occur may allow the Forest Service to effectively mitigate noncompetitive bidding and antitrust resources to be allocated efficiently. A multi-stage procedure is developed for identifying the market areas where bidding is least competitive. The third stage of the procedure introduces an innovative method for analyzing the competitiveness of bidding behavior. This new method compares the differential impacts of regular and nonregular bidders on bid price. The application of the multi-stage procedure to nine forests in Washington and Oregon reveals noncompetitive bidding may have been present in two forests between 1973 and 1981. Analyses of later years (1985-90) reveal, however, that the noncompetitive bidding that may have been present in earlier years greatly diminished.