A Spatial Price Determination Model for Multi-Market Heterogeneously Distributed Resources : An Application to Forestry Markets in Sweden

• The spatial dimension is a key paradigm in price determination, as attested by recentstudies in the literature that highlighted the differential in market behavior between spa-tial and non-spatial pricing settings. In this paper, we develop a model of spatial pricingfor multi-market heterogeneously distributed resources, with an application to the Swed-ish forestry sector. The focus of the model is to estimate the impact of spatial interactionon the demand for resources in terms of resource allocation, competition, and pricing. Inits core, the pricing mechanism relies on a supply–demand framework. Using disaggre-gated data at the gridcell level for forest feedstock supply and harvesting costs in Sweden,we construct regional supply curves for each gridcell assuming a maximum transporta-tion distance to delimit the potential market. Demand nodes are exogenously determinedand are adjusted using a distance-decay model to assess demand pressure across loca-tions. We apply the model empirically to assess the impact on forest feedstock prices of a20 TWh increase in biofuel production.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Keyword

Economics

Nationalekonomi

Publication and Content Type

ref (subject category)

art (subject category)