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From bidding data, we estimate the underlying value distribution for Forest Service timber. We find that bidder values decrease $2/mbf (thousand board feet) with each mile from the tract and that small firms (fewer than 500 employees) have values that are $72/mbf lower than large firms. The empirical value distribution is used to simulate various hypothetical scenarios designed to inform public policy. The most anticompetitive mergers raise price by less than 3%, and a 4% decline in marginal costs through greater merger efficiencies is enough to offset a 1% anticompetitive price increase. Eliminating the SBA set-aside program would raise timber revenues by 15%. A policy of granting bidding preferences to small and more-distant bidders would raise revenue by approximately one-tenth of one percent. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Potential competition sign@cantly affects the size ofwinning bids in Forest Service sealed-bid timber auctions and has little @ect on winning bids in oral auctions. Winning sealed bids depend even more, however, on actual competition, a result suggesting collusion. This explanation is supported using an index representing the likelihood an auction was rigged. Preclusive bidding (a type of collusion) in oral auctions is indicated by a positive relationship between hauling distances and the size of winning sealed bids. Comparisons of winning-bid variances, overbids, and numbers cf bidders across auction type support this explanation 4 oral auction prices.

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