Ken Jung

Abstract: Natural resource owners frequently design and auction the rights to extraction contracts in order to raise revenuewhile achieving resource management objectives. I study the tradeoff between revenue and the timing of extraction in the context of the mountain pine beetle outbreak, a large climate-induced shock that increased the urgency of timely harvests in infested forests. I show that the use of quality-adjusted pricing in British Columbia timber auctions made it profitable for firms to salvage value from beetle-killed trees, but also provided incentives to delay the harvest of decaying trees. This delay ran counter to the province's goals by allowing pupating beetles to mature, potentially threatening the health of neighboring forests. I use a regression discontinuity design for bidding formats to show that harvests in auctioned tracts that implement quality-adjusted pricing are 3.6 months more delayed than tracts that do not. To measure the effects of counterfactual pricing schemes, I estimate a dynamic resource extraction model in which the timing of harvests depends on lumber prices and tract characteristics, including the severity of beetle attack. I demonstrate that the province's contract designs were frequently interior to the optimal frontier between revenue and delay, indicating substantial gains to alternative pricing policies targeted toward beetle-infested tracts.