Per-unit bidding rules and buyer under-performance in natural resource sales

In this article, we examine the role of per-unit bidding rules on firm-level contractual performance. In particular, we test the hypothesis that buyers will act on incentives to under-perform when bids are accepted in per-unit form. The empirical application uses data from per-unit auction sales of US Forest Service timber. The statistical analysis indicates that buyers systematically undercut when per-unit bids exceed the value of individual units of timber.