To Harvest or Not to Harvest? An Analysis of Cutting Behavior on Federal Timber Sales Contracts

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Abstract
Economists have studied the environmental consequences and competitivenews of alternative sales techniques for publicly-owned natural resources. Little attention has been paid however, to fluctuations in revenues resulting from the "option" nature of the public resource sales. This paper analyzes how the contract structure of public resource sales leads to defaults and thereby revenue instability. Data on U.S. Forest Service timber sales contracts (which were modified in the early 1980s in response to default problems) suggest that reduced contract lengths and more stringent requirements for extension increase harvest rates, but that price adjustment clauses are unlikely to have similar effects.

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