Original Research

The pricing of trees: A study of hold-ups, holdouts, buy-outs and sell-offs

WD Reekie
South African Journal of Economic and Management Sciences | Vol 7, No 4 | a1293 | DOI: https://doi.org/10.4102/sajems.v7i4.1293 | © 2004 WD Reekie | This work is licensed under CC Attribution 4.0
Submitted: 14 January 2004 | Published: 30 November 2004

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Abstract

This paper draws on transactions cost analysis, price and auction theory, and competition authority findings in order to answer some questions on the structure and trading patterns of the South African forestry industry. Does a forestry firm linked contractually to supply an adjacent sawmill customer, form part of a bilateral monopoly?  For competition policy what are the relevant markets each party sells into or buys from?  Can either firm opportunistically hold-up the other in price revisions?  Or, where contracts have no effective terminal date, can one party hold out against offers of contract buyout?  If one party is a state agency are there rights of eminent domain?  If the state agency is due to be privatised can the method of sale, for example a simultaneous ascending auction, resolve some of the dilemmas? 

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