Econometric Model of Price Formation in the United States Paper and Paperboard Industry
Keywords:Paper, paperboard, prices, econometrics, economies of scale, derived demand, energy, wastepaper
AbstractA 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.
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