Supply analysis of the forestry industry

This paper performs a supply analysis of the Swiss forestry industry at the firm level. It explores the factors affecting quantity of supply, and determines the behavioural characteristics of the forestry firms. Supported by instrumental variables and several proxies, panel data methods are used in the regression analysis, allowing to distinguish several characteristics of firms in this strongly heterogeneous environment. Overall, results suggest that Swiss forestry firms are not acting as profit maximizers. This points towards the possibility that at least some of them could be modelled using a target revenue approach or similar models. Specifically, negative supply elasticities are estimated, with different magnitudes depending on firm characteristics such as ownership and on the econometric model used. Moreover, results indicate a concentration of market power among big forestry firms, which might be of special importance in the bargaining process with sawmills.