Econometric Model of Price Formation in the United States Paper and Paperboard Industry

Authors

  • Joseph Buongiorno
  • Merhdad Farimani
  • Wu-Jen Chuang

Keywords:

Paper, paperboard, prices, econometrics, economies of scale, derived demand, energy, wastepaper

Abstract

A model of price determination was proposed for the United States paper and paperboard industry. It assumed a generalized Cobb-Douglas production function, mark-up pricing, and cost minimization. The model was estimated for five commodity groups, over the period January 1967 to June 1979. The resulting equations accurately represented price behavior during the sample period. Coefficients had the expected sign and plausible magnitudes, except for the total paper and paperboard aggregate. Capital costs appeared to have a dominant importance in the setting of prices. Product prices did not appear to be related to capacity utilization rates, nor to the level of national production. Technological changes, other than those that were labor-saving, did not have a significant effect on paper and paperboard prices during the sample period. Derived demand equations for capital, labor, energy, pulp, and wastepaper were obtained.

References

Buongiorno, J., and J. K. Gilless. 1980. Effects of input costs, economies of scale, and technological change on international pulp and paper prices. Forest Sci.26(2):261-275.nBuongiorno, J., J. C. Stier, and J. K. Gilless. 1981. Economies of plant and firm size. Wood Fiber.13(2):102-114.nChung, J. W. 1979. The effects of material costs on inflation. Appl. Econ.11:271-287.nDagenais, M. G. 1976. The determination of newsprint prices. Can. J. Econ.59:442-461.nEckstein, O. 1964. A theory of the wage-price process in modern industry. Rev. Econ. Studies31:267-286.nEckstein, O., and G. Fromm. 1968. The price equation. Am. Econ. Rev.58:1159-83.nEckstein, O., and D. Wyss. 1972. Industry price equations. Pages 133-165 in O. Eckstein, ed. The econometrics of price determination. Washington, D.C.: Board of Governors of the Federal Reserve System and Social Science Research Council.nEntrican, A. R. 1950. Quality vs. quantity in New Zealand forestry and forest products. N. Z. J. For6(2):100-111.nGrant, R. 1978. Optimum is beautiful: small mills can work. Pulp Paper Int.20(30):51-58.nGuthrie, J. A. 1972. An economic analysis of the pulp and paper industry. Washington State University Press, Pullman, Washington. 235 pp.nHall, R. E., and D. W. Jorgenson. 1971. Application of theory and optimum capital accumulation. G. Fromm, ed. Washington, D.C.: The Brookings Institution.nJohnston, J. 1972. Econometric methods. McGraw-Hill, New York. 437 pp.nKing, K. F. S. 1977. The political economy of pulp and paper. Unasylva29(117):2-8.nMachlup, F. 1967. Theories of the firm: Marginalist, behavioral, managerial. Am. Econ. Rev.57: 1-33.nMaddala, G. S. 1977. Econometrics. McGraw-Hill, New York, 516 pp.nMcKillop, W. L. M. 1967. Supply and demand for forest products—An econometric study. Hilgardia38(1):1-132.nNordhaus, W. D. 1972. Recent developments in price dynamics. Pages 133-165 in O. Eckstein, ed. The econometrics of price determination. Washington, D.C.: Board of Governors of the Federal Reserve System and Social Science Research Council.nRich, S. U. 1978. Pricing patterns in the paper industry. For. Prod. J.28(4):13.nSandwell, P. R. 1960. Feasibility of small pulp and paper operation. Proceedings Fifth World Forestry Congress3:1604-8.nShinjo, K. 1977. Business pricing policies and inflation: Japanese case. Rev. Ec. Stat.59:447-55.nStrazheim, D. H., and M. R. Strazheim. 1976. An econometric analysis of the determination of prices in manufacturing industries. Rev. Ec. Stat.58:191-201.nSutton, W. R. J. 1973. The importance of size and scale in forestry and forest products. N. Z. J. For.18(1):63-80.nTheil, H. 1971. Principles of econometrics. John Wiley and Sons, New York. 736 pp.nVarian, H. R. 1978. Microeconomic analysis. Norton, New York. 284 pp.nWorrell, A. C. 1959. Economics of American Forestry. John Wiley and Sons, New York. 441 pp.n

Downloads

Published

2007-06-27

Issue

Number 1 / January 1983

Section

Research Contributions

License

The copyright of an article published in Wood and Fiber Science is transferred to the Society of Wood Science and Technology (for U. S. Government employees: to the extent transferable), effective if and when the article is accepted for publication. This transfer grants the Society of Wood Science and Technology permission to republish all or any part of the article in any form, e.g., reprints for sale, microfiche, proceedings, etc. However, the authors reserve the following as set forth in the Copyright Law:

1. All proprietary rights other than copyright, such as patent rights.

2. The right to grant or refuse permission to third parties to republish all or part of the article or translations thereof. In the case of whole articles, such third parties must obtain Society of Wood Science and Technology written permission as well. However, the Society may grant rights with respect to Journal issues as a whole.

3. The right to use all or part of this article in future works of their own, such as lectures, press releases, reviews, text books, or reprint books.