An Economic Analysis of Swiss Wood Markets

In this NRP 66 project, researchers analyse the workings of the Swiss wood markets on the basis of case studies and explain them with the help of economic theories. The results will be used to develop an agent-based model. This should make it possible to develop scenarios for future wood availability and present options for influencing it through economic instruments.

Background

By producing wood, the forestry sector provides an important basis for the sustainable use of resources in Switzerland. However, given the different uses of wood, the demand for it is marked by competition. It is therefore not sufficient to know how much wood will grow, the question to be asked is in what circumstances and for whom will it actually be available. In this context, the largely un-researched behaviour of actors in the forestry sector plays a significant role. The project aims to generate knowledge in this area that is relevant to economics and to policy-making in the forestry sector. By applying an agent-based modelling, the project offers the opportunity to simulate individual changes in supply and demand as well as external influences and to develop scenarios for the efficient and sustainable use of resources.

Aim

On the basis of new approaches within behavioural and institutional economics, the researchers develop specific hypotheses for the behaviour of actors on the supply and demand side of wood markets. These results coupled with insights gained from participatory processes in the case study regions enable the researchers to depict market activity and represent exemplary workings of the market. This is achieved by capturing the market structure and the actors' behaviour in an agent-based model through, for example, analysing different ownership constellations as well as transaction costs and contract designs. The knowledge gain is based on the development of scenarios for specific market situations, which can provide information on the expected availability of wood and its use.

Significance

The agent-based model is based on insights from theoretical economics and on participatory processes. It provides a well-founded basis for explaining the behaviour of the Swiss wood markets. In this way, it will become possible to identify and analyse market developments at an early stage. In addition, institutional regulations and incentives created by economic policy-makers could be assessed with regard to their suitability for improving the availability of wood and controlling allocation.