Journal of Forest Economics > Vol 14 > Issue 2

Industry consolidation and price in the US linerboard industry

Haizheng Li, , haizheng.li@econ.gatech.edu Jifeng Luo, , jifeng.luo@mgt.gatech.edu
 
Suggested Citation
Haizheng Li and Jifeng Luo (2008), "Industry consolidation and price in the US linerboard industry", Journal of Forest Economics: Vol. 14: No. 2, pp 93-115. http://dx.doi.org/10.1016/j.jfe.2007.05.001

Published: 01 Apr 2008
© 0 2008 Haizheng Li, Jifeng Luo
 
Subjects
 
Keywords
JEL Codes:D43L73
Demand and supply systemIndustry consolidationMarket structurePaperboard industryPrice
 

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In this article:
Introduction
The US linerboard industry
Model specifications
The data
Model estimation and empirical results
Conclusion

Abstract

Starting from the 1980s, the US paper and paperboard industry has recorded an increasing degree of consolidation through mergers and acquisitions. This strategy, combined with voluntary downtime, is adopted by producers as a method to tackle excess capacity and to reduce costs in order to improve profitability. In this study, we investigate the impact of industry consolidation on price in the linerboard industry. We estimate a dynamic demand/supply system model that explicitly incorporates market structure. We find a low own-price elasticity of linerboard demand and an insignificant substitute effect of plastic containers. Additionally, linerboard price does not seem to respond to current demand and adjusts slowly across time. Moreover, industry-operating rate shows a positive, statistically significant, but small impact on price. Although those findings suggest an oligopoly market and some degree of barometric price leadership, market concentration shows no statistically significant effect on price.

DOI:10.1016/j.jfe.2007.05.001