Progress 05/15/08 to 05/14/13
Outputs
OUTPUTS: Empirical measurement techniques of information flows and market power exertion have been extended to better understand how relationships among vertically related firms in a supply chain emanating from an ecosystem are changing. An assessment of the way that increased input costs affect market structure and thus market power exertion was applied to the pulp and paper industries. The work shows that the mechanism by which increased costs due to regulation can lead to market concentration over time need more study as the revealed market concentration dynamics from this work are not congruent with accepted theory. Further work with other sector supply chains during this project advanced the understanding of the dynamics of competition in those sectors. The outputs from this project are contributions to the body of knowledge that are communicated through peer-reviewed publications and presented at professional meetings. This is the final report for this project because the principal investigator has retired. There are a number of research manuscripts that will be finished and published, but no further research will be initiated under this project. PARTICIPANTS: The principal investigator retired from Texas A&M University and Texas AgriLife Research in 2011. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.
Impacts
Increasing concentration at tiers along a supply chain is changing the distribution of rents among supply chain participants. Measuring the distribution of profits among vertically related firms and the forces that lead to changes in this distribution over time constituted the work of this project, with a focus on supply chains emanating from natural ecosystems. These efforts were complicated by structural changes in industries, like emergence of timber management organizations in the forest products industry, the increasing presence of long-term contracts, the large public sector presence in natural resource industries, and the rise of exogenous events, such as natural disasters like fires and hurricanes, that have important impacts on the supply chain. This work has led to development of additional tools for regulatory and economic market analysis of supply chains with these characteristics. Causal relationships among information flows, market structure, and directions of control in decentralized multi-echelon supply chains have been explicated more clearly under this project. Some major findings include: (i) with respect to vertical relationships in supply chains, regulatory and legal changes can have tremendous impacts on an industry, implying changes up and down the supply chain and impacting interlinked markets; (ii)contemporaneous information flow can be affected greatly by regulatory changes and the resulting industry restructuring, representing a shift in tier dominance along a chain; (iii) co-use of spot market and contracts to procure key inputs by processors appears to allow those processors some control of spot price through contract purchases; (iv) in the pulp and paper industry in particular, regulatory compliance and other costs can cause changes in market structure and concentration at each tier in a supply chain; (v) the dynamics associated with these changes may not be temporally consistent with accepted theory and these bear further study, and (vi) in some markets, dominant quality characteristics of an input tend to be more important than market concentration, size economies, procurement methods, or other market and quality variables in determining the input price paid by processors.
Publications
- Burton, Diana M., Irma A. Gomez, and H. Alan Love. 2011. Environmental Regulation Cost and Industry Structure Changes. Land Economics, August 2011, 87 (3): 545-557.
- Burton, Diana M. and H. Alan Love. 2011. Effect of Plant Location Decisions on Input Costs. Poster 13176, presented at the Agricultural and Applied Economics Association Annual Meetings in Pittsburgh, PA, July 24-26, 2011.
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Progress 01/01/10 to 12/31/10
Outputs
OUTPUTS: Work in 2010 continued to focus on a better understanding of supply chains emanating from natural ecosystems. Projects involved methods developed to quantify the effects of processor entry on input prices where the input is key to output and no substitutability among inputs exists. This is being applied empirically in forest products markets. The ability to quantify the impact of processor entry on input costs can provide important strategic information and enable better forecasts of the effects of entry on the entire supply chain with implications for the base ecosystems. This information can be important to both the companies in the supply chain and to regulators. Additional research efforts concerned evaluation of price behavior in markets of varying structures with a focus on stumpage markets and on the mechanisms by which input costs affect market structure. Empirical work on the effects of environmental regulation on forest products industry structure is in press. PARTICIPANTS: Nothing significant to report during this reporting period. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.
Impacts
The ability to quantify the impacts of cost changes in the supply chain can provide important strategic information for firms operating within that supply chain, for regulators, and for owners/managers of the ecosystems on which these supply chains depend. Better understanding of how processor entry or changes in costs affects markets for key inputs can enable enhanced forecasts of key input use in the supply chain and a better understanding of how supply chains will evolve in changing economies. In the case of timber, this primary input has diverse ownerships and the structure of markets for timber and forestland are undergoing material changes. To the extent that large amounts of timber are federally and publicly owned, policymakers need to understand how processor competitive behavior downstream will impact this natural resource as the ownership structure changes and companies become less vertically integrated. In addition, as forests become better recognized as sources of ecosystem services such as water and carbon sequestration, an understanding of how forests interact with processors in the downstream supply chains becomes more valuable. The systematic assessment of impacts of market changes in ecosystem supply chains where they can be isolated and measured will contribute to an enhanced knowledge of the value chain.
Publications
- Burton, Diana M., Irma A. Gomez, H. Alan Love. Environmental Regulation Costs and Industry Structure Changes. Land Economics , 2010, forthcoming.
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Progress 01/01/09 to 12/31/09
Outputs
OUTPUTS: Work in 2009 focused on gaining a better understanding of supply chains coming from ecosystems. Specific projects involved further refinements to methods developed to quantify the effects of processor entry on input prices where that input is key to output. Ongoing is work to extend these methods to other commodities and markets as a way to validate their general use. The ability to quantify the impact of entry on input costs can provide important strategic information and enable better forecasts of the effects of entry on the supply chain. This information can be important to both the companies in the supply chain and to regulators. Additional research efforts concerned evaluation of price behavior in markets of varying structures with a focus on stumpage markets and on the mechanisms by which input costs affect market structure. PARTICIPANTS: Nothing significant to report during this reporting period. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.
Impacts
The ability to quantify the impacts of cost changes in the supply chain can provide important strategic information for firms operating within that supply chain. Better understanding of how processor entry or changes in costs affects markets for key inputs can enable enhanced forecasts of key input use in the supply chain and a better understanding of how supply chains will evolve in changing economies. In the case of timber, this primary input has diverse ownerships and the structure of markets for timber and forestland are undergoing material changes. To the extent that large amounts of timber are federally and publicly owned, policymakers need to understand how processor competitive behavior downstream will impact this natural resource as the ownership structure changes and companies become less vertically integrated. In addition, as forests become better recognized as sources of ecosystem services such as water and carbon sequestration, an understanding of how forests interact with processors in the downstream supply chains becomes more valuable. The systematic assessment of impacts of market changes in ecosystem supply chains where they can be isolated and measured will contribute to an enhanced knowledge of the value chain.
Publications
- No publications reported this period
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Progress 01/01/08 to 12/31/08
Outputs
OUTPUTS: Work in 2008 focused on gaining a better understanding of producer behavior within supply chains by an in-depth study of the literature on supply chains in the natural resources. Specific projects involved refinements to methods developed to quantify the effects of processor entry on input prices where that input is key to output. Ongoing is work to extend these methods to other commodities and markets as a way to validate their general use. The ability to quantify the impact of entry on input costs can provide important strategic information and enable better forecasts of the effects of entry on the supply chain. This information can be important to both the companies in the supply chain and to regulators. PARTICIPANTS: Nothing significant to report during this reporting period. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.
Impacts
The ability to quantify the impacts of changes in the supply chain can provide important strategic information for firms operating within that supply chain. Better understanding of how processor entry affects markets for key inputs can enable enhanced forecasts of key input use in the supply chain and a better understanding of how supply chains will evolve in changing economies. In the case of timber, this primary input has diverse ownerships and the structure of the markets for timber and forestland are undergoing material changes. To the extent that large amounts of timber are federally and publicly owned, policymakers need to understand how processor competitive behavior downstream will impact this natural resource as the ownership structure changes and companies become less vertically integrated. In addition, as forests become better recognized as sources of ecosystem services such as water and carbon sequestration, an understanding of how forests interact with processors in the downstream supply chains becomes more valuable.
Publications
- Burton, D.M., H.A. Love, G. Ozertan, V. Salin. 2008. Competition in Contract Procurement of Grower Services. Accepted for Decision Sciences International Annual Meeting, Baltimore, MD.
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Progress 01/01/07 to 12/31/07
Outputs
Work in 2007 focused on gaining a better understanding of producer behavior within supply chains. Most work sought to quantify the effects of processor entry on input prices where that input is key to output. For example, timber is the key input in lumber production. Procurement areas for key inputs have major effects on processor location decisions and on the competitiveness of that supply chain. So, location choice for a sawmill will have a quantifiable impact on the timber input market and on the competitiveness of the new mill and other processors already working in the area. The ability to quantify this impact can provide important strategic information and enable better forecasts of the effects of entry on the supply chain.
Impacts
The ability to quantify the impacts of changes in the supply chain can provide important strategic information for firms operating within that supply chain. Better understanding of how processor entry affects markets for key inputs can enable enhanced forecasts of key input use in the supply chain. In the case of timber, this primary input has diverse ownerships and the structure of the markets for timber and forestland are undergoing material changes. To the extent that large amounts of timber are federally and publically owned, policymakers need to understand how processor competitive behavior downstream will impact this natural resource. In addition, as forests become better recognized as sources of ecosystem services, such as water and carbon sequestration, an undertanding of how these forests interact with processors in the supply chains becomes more valuable.
Publications
- Burton, Diana M., and H. Alan Love. 2007. Measuring the Effect of Processor Entry on Strategic Input Pricing: The Case of U.S. Beef Processing. Invited paper presented at the Alberta Agricultural Economics Association Annual Conference, Red Deer, Alberta, Canada, May 3-4.
- Burton, Diana M. and H. Alan Love. 2007. The Effect of Plant Location Decisions on Input Costs.
- Burton, Diana M. and H. Alan Love. 2007. Measuring the Effect of Processor Entry on Strategic Input Price.
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Progress 01/01/06 to 12/31/06
Outputs
Funds for this McIntire-Stennis project were supplemented by funding through grants from USDA NRI and a cooperative agreement with USDA ERS. Progress in pursuing the objectives of this project is proceeding in several efforts. A presentation was made at a major professional meeting and a manuscript was submitted for publication. Work in other areas is still in progress.
Impacts
Enhanced understanding of how contract mechanism design and incentives/penalties will affect the behavior of producers and consumers in natural resource and agricultural markets permits improved mechanism design and the realization of more economic welfare for society. In addition, a fuller understanding of market power exertion will enable better mechanism design, improved knowledge of the impacts of imperfectly competitive markets and point to enhanced policy alternatives.
Publications
- Burton, Diana M. and H. Alan Love. 2006. Entry Effects on Strategic Input Procurement Competition. INFORMS Annual Meeting, Pittsburgh, PA, November 2006.
- Burton, Diana M. and H. Alan Love. 2006. Measuring the Effect of Processor Entry on Strategic Input Procurement Price, 2006, submitted.
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Progress 01/01/05 to 12/31/05
Outputs
Work is progressing on the objectives of this project. One article was published this year and several more are in progress or in review. In addition, funds for this McIntire-Stennis project were supplemented by grants: one from USDA NRI and a cooperative agreement with USDA ERS.
Impacts
Increased understanding of how contract mechanism design and incentives/penalties will affect the behavior of producers and consumers in natural resource and agricultural markets will permit enhanced mechanism design and the realization of more economic welfare for society.
Publications
- Burton, Diana M., H. Alan Love, Gokhan Ozertan, and Curtis R. Taylor. 2005. "Property Rights Protection of Biotechnology Innovations." Journal of Economics & Management Strategy, Vol. 14, Issue 4, December, 779-812. (lead article in this issue)
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Progress 01/01/04 to 12/31/04
Outputs
This project is supplemented by a USDA National Research Initiative grant to examine how the advent of biotechnology will affect producers' objectives, contract design, and market exchange mechanisms in timber and forest products markets. In 2004, a methods publication was placed in a high quality journal. This method will be adapted to the long time frames of forest production and used to evaluate the societal preferences regarding the benefits and costs of forests.
Impacts
A better understanding of the interaction of wood producers and forest products industry in terms of contractual exchange will inform public decisions about forest policy and may enhance forest products markets.
Publications
- Burton, Diana M., H. Alan Love and Gordon C. Rausser. Stochastic Optimization of Policy Preferences, Applied Economics, Volume 36, Number 13, July 2004, pp. 1489-1499.
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Progress 01/01/03 to 12/31/03
Outputs
A principal-agent model that permits agent risk aversion is being adapted to the dynamic requirements of forestry modeling. This model will be used to evaluate the use of contracts in the forest industry as to their efficacy in terms of efficient exchange, protection of the principal's intellectual property and the agents abitliy to deal with risk over the long time frames needed for forest and wood production. In a separate effort, data are being assembled to evaluate market power in the forest products industry.
Impacts
A better understanding of the interaction of wood producers and forest products industry in terms of contractual exchange will inform public decisions about forest policy and may enhance forest products markets.
Publications
- Love, H. Alan, Diana M. Burton and Gordon C. Rausser. Stochastic Optimization of Policy Preferences, Applied Economics, 2003, forthcoming.
- Ozertan, Gokhan, Diana M. Burton, H. Alan Love and Curtis R. Taylor. Property Rights Protection of Biotechnology Innovations. 2003, submitted.
- Burton, Diana M. H. A. Love, Gokhan Ozertan and Victoria Salin. Integrator Entry into the Market for Broiler Chickens, submitted to USDA Grain Inspection, Packers and Stockyards Administration, 2003, 50 pages.
- Salin, Victoria, H.Alan Love, Diana M. Burton, Gokhan Ozertan and Mark Muerrise. Market Areas for Broiler Chickens, submitted to USDA Grain Inspection, Packers and Stockyards Administration, 2002, 45 pages.
- Salin, Victoria, H. Alan Love and Diana M. Burton, Cointegration in the Markets for Broilers, submitted to USDA Grain Inspection, Packers and Stockyards Administration, 2002, 35 pages.
- Bonnicksen, Thomas M. and Diana M. Burton. Development of Forest Policy in the United States. Chapter 1 in Introduction to Forest Science, Third Edition, Raymond A. Young and Ronald L. Giese, editors, John Wiley & Sons, New York, 2003.
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Progress 01/01/02 to 12/31/02
Outputs
This TAES project has provided support for a number of research efforts related to the objectives of this project in the past year. It has facilitated work on a USDA NRICGP grant proposal that was funded to extend earlier work funded by this project and by other competitive grants. This has been a year of consolidation of my last several years of research under this project, work with collaborators and work with graduate students, into manuscripts for publication. In addition to the publications and presentations reported below, several manuscripts are now in submission at peer-reviewed journals. Several other manuscripts are in progress.
Impacts
Enhanced models will lead to a deeper understanding of how market partipants will respond to shocks in the markets and to government policies. Better modeling techiques are generalizable beyond forestry and will make a contribution to analyses in natural resources, agricultural and other sectors of the economy.
Publications
- Ozertan, Gokhan, Love, H. Alan, Curtis R. Taylor and Diana M. Burton. Intellectual Property Rights Protection of Reproducible Biotechnology Innovations. International Consortium on Agricultural Biotechnology Research (ICABR), 5th International Conference, Ravello, Italy, June 2001.
- Bonnicksen, Thomas M. and Diana M. Burton. Development of Forest Policy in the United States. Introduction to Forest Science, Third Edition, Raymond A. Young and Ronald L. Giese, editors, John Wiley & Sons, New York, 2002, in press.
- Ozertan, Gokhan, H. Alan Love, Curtis R. Taylor and Diana M. Burton. Property Rights Protection of Biotechnology Innovations. Fifth Istitut National de La Recherche Agronomique (INRA) and Institut D'Economie Industrielle (IDEI) Conference on Industrial Organization and the Food Processing Industry, Toulouse, France, June 14-15, 2002. Discussant: Claude Crampes, Toulouse University.
- McCarl, Bruce A., Darius M. Adams, Ralph J. Alig, Diana Burton and Chi-Chung Chen. Effects of Global Climate Change on the U.S. Forest Sector: Response Functions Derived from a Dynamic Resource and Market Simulator, Climate Research, Volume 15, September 2000, pp.195-205.
- Burton, Diana M. and Elizabeth T. Kennedy. Forest Health Prevention Treatments Economic Analysis Final Report, USDA Forest Service, Forest Health and Protection, 2001, 142 pages.
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Progress 01/01/01 to 12/31/01
Outputs
In 2001, research for this project has focused on understanding the potential impact of biotechnology innovations in markets. Several papers were presented at conferences that evaluate the impact on economic agent behavior in a principal-agent modeling framework with asymmetric information. A grant proposal was written for funding to extend the model to the multipleriod world of forestry. Also, work on use of nonparametric techniques to evaluate the market structure of pulp and paper, and lumber and wood products, markets continues. Data is currently being collected to support estimation of a dynamic model of these markets as well.
Impacts
The impact of this work will be enhanced understanding of the current structure of these markets and the behavior of economic agents (producers and consumers) in these markets in response to price and other shocks. Policy makers will have better information when considering forest resource markets.
Publications
- Bonnicksen, T.M. and D.M. Burton. 2001. Development of Forest Policy in the United States. Introduction to Forest Science, Third Ed., R.A. Young and R.L. Giese, eds., John Wiley & Sons, NY, in press.
- Ozertan, Gokhan, Love, H. Alan, Curtis R. Taylor and Diana M. Burton. 2001. Intellectual Property Rights Protection of Reproducible Biotechnology Innovations. International Consortium on Agricultural Biotechnology Research (ICABR), 5th International Conference, June 2001.
- Ozertan, Gokhan, Love, H. Alan, Curtis R. Taylor and Diana M. Burton. 2001. Economic Impacts of Genetic Safeguards on Plant Agriculture. Fifth ERC/METU International Conference in Economics, September 2001.
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Progress 01/01/00 to 12/31/00
Outputs
The study uses quantitative methods to better understand the organization, trade and political-economic environment in forestry and resource markets. In the past year, focus has been on modeling stumpage and pulp and paper markets in a way that permits measurement of imperfectly competitive market structures. Further work was done on enhancing estimation techniques for an ongoing analysis of changes in concentration in pulp mill and paper mill capacity as a result of environmental costs using a nonstationary Markov model. Part of the work on structural modeling of the forestry sector involves an assessment of how the sector will respond to climate change.
Impacts
The impact of these studies will be enhanced understanding of the way these forest and resource markets work. This is valuable to policy makers, market participants and others who are involved with and make decisions about transactions, institutions and policies for these markets.
Publications
- McCarl, Bruce A., Darius M. Adams, Ralph J. Alig, Diana Burton and Chi-Chung Chen. 2000. Effects of Global Climate Change on the U.S. Forest Sector: Response Functions Derived from a Dynamic Resource and Market Simulator, Climate Research, Volume 15, pp.195-205.
- Dreesen, Alan D., Diana M. Burton, Robert G. Merrifield and C.T. Smith. 2000. Texas Forestry Chart Book, The Forests and Forest Economy of Texas, Department of Forest Science and Texas Forestry Association, November.
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Progress 01/01/99 to 12/31/99
Outputs
The study uses quantitative methods to better understand the organization, trade and political-economic environment in forestry and resource markets. In the past year, focus has been on modeling stumpage and pulp and paper markets in a way that permits measurement of imperfectly competitive market structures. Further work was done on enhancing estimation techniques for an ongoing analysis of changes in concentration in pulp mill and paper mill capacity as a result of environmental costs using a nonstationary Markov model. Part of the work on structural modeling of the forestry sector involves an assessment of how the sector will respond to climate change.
Impacts
The impact of these studies will be enhanced understanding of the way these forest and resource markets work. This is valuable to policy makers, market participants and others who are involved with and make decisions about transactions, institutions and policies for these markets.
Publications
- Akleman, Derya G., David A. Bessler and Diana M. Burton. 1999. Modeling Corn Exports and Exchange Rates with Directed Graphs and Statistical Loss Functions. Chapter 18 in Clark Glymour and Gregory F. Cooper, editors, Computation, Causation and Discovery. AAAI/MIT Press, Menlo Park, CA and Cambridge, MA, pp497-520.
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Progress 01/01/98 to 12/31/98
Outputs
The study uses quantitative methods to better understand the organization, trade and political-economic environment in forestry and resource markets. In the past year, focus has been on modeling stumpage markets. One area of research modeled a strategic explanation for forest products companies to be partially backward integrated into timber production. A theoretical model was presented and conditions determining the market equilibriums were examined. A second research effort focused on expectations mechanisms used by economic agents in stumpage markets in a dynamic model of producer behavior that permits risk aversion. Of the 3 distinct mechanisms for price expectations empirically tested (naive, exponentially smoothed and nonparametric), the nonparametric formulation was found to best explain observed harvesting behavior. A third area of investigation involved analysis of changes in concentration in pulp mill and paper mill capacity as a result of environmental
costs using a nonstationary Markov model. This research found that increased costs due to environmental regulation affect the probabilities of capacity moving from smaller companies to larger firms and empirically confirms the idea that market structure may be a function of environmental regulation.
Impacts
(N/A)
Publications
- Gomez, Irma A., H. Alan Love and Diana M. Burton. 1998. Alternative Price Expectations Regimes in Timber Markets, Journal of Forest Economics, in press.
- Love, H. Alan and Diana M. Burton. 1998. A Strategic Rationale for Captive Supplies, Journal of Agricultural and Resource Economics, in press.
- Gomez, Irma A., H. Alan Love and Diana M. Burton. 1998. Alternative Price Expectations Regimes in Timber Markets. Forestry Decision-Making in an Uncertain World, Workshop held at Warnell School of Forest Resources, University of Georgia, Athens, Georgia, March 23-24, 1998.
- Gomez, Irma A., H. Alan Love and Diana M. Burton. 1998. Analysis of the Effects of Environmental Regulation on Pulp and Paper Industry Structure. Selected Paper presented at the American Agricultural Economics Association Annual Meeting, Salt Lake City, Utah, August 1998. Abstract published in the American Journal of Agricultural Economics, December 1998, 80(5).
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