Browsing by Subject "Assortment pricing"

The usage of assortment pricing in roundwood trade creates a clear conflict of financial interests between the buyer and the seller, since sellers only get about a quarter of their total stumpage earnings from pulpwood, while its demand is likely to stay high or to increase. This thesis studies two possible alternatives to assortment pricing, stem and fractional stem pricing. In both methods, the buyer’s bucking decision and the pricing are separated from each other. This study aims to assess the usability of the alternative pricing methods by comparing how actual stand values differ between assortment, stem and fractional stem pricing when they are equally valued in pre-harvest trade offers. The premise of this study is that the smaller the actual stand value difference between assortment pricing and the alternative pricing methods, the more usable they are in the roundwood trade. This is because neither side wants to take the possible monetary risk affiliated with switching away from assortment pricing. The comparison was conducted by determining equally valued assortment pricing, stem pricing and fractional stem pricing (according to Luke’s 2016 method proposition) for 27 study stands, on the basis of Trestima-based pre-harvest data and well-known taper curve and stem length models. With the resulting unit prices, all three pricings were again conducted for the same stands, this time constructed from harvester data by using the same taper curve and stem length models. Based on the results, switching to stem pricing or fractional stem pricing creates on average from one to three percent higher stand values than assortment pricing. Stem pricing however deviated more than fractional stem pricing, so it could be considered to be slightly riskier method. Overall, both alternative pricing methods are usable in roundwood trade, and their usage should be encouraged.