Sealed-bid versus oral-auction timber offerings: implications of imperfect data

Abstract

The central issue regarding sealed-bidding versus oral-auction timber offerings focuses on the question of revenue generation. On this point, the literature provides no consistent answer. This study measured the difference'in bid price between sealed-bid and oral-auction timber offerings in the Northern Region of the U.S. Forest Service. A two-step estimation process, involving a probit model followed by a linear regression model, was used. That two-step process did not produce the expected results because the timber offering data used did not correspond to quality expectations; specifically, sale method was not always assigned on the basis of offering characteristics. Subsequent analyses indicated that when timber offerings in the Northern Region are randomly assigned a sale method, sealed-bid sales generated about $6 per 103 board ft (1 board ft = 2.4 dm3) more than oral auction sales. When the sale method is based on offering characteristics, oral auction sales produced revenues of about $9 per 103 board ft higher than sealed-bid offerings. Recommendations for handling data quality problems are provided.