Inventory, Price, and Output in the Linerboard Industry, 2006 Papermaker’s Conference
In this study, we investigate the market dynamics in the linerboard industry. Using discrete choice modeling techniques, we estimate the probability of price and production response to inventory changes based on monthly data from 1980 to 1999. Our tests show that inventory causes changes in price, but not vice versa. Moreover, price responses to inventory are asymmetric, and upward adjustment in price is “stickier” than downward adjustment. In contrast, production is found to lead inventory change, but a reverse causal relationship exists. It appears that the industry cuts output in response to inventory pressure, but the response seems to be temporary. Moreover, price drops earlier in response to inventory buildup and output drops much later. There seems to be a tendency for the industry to adjust price first before adjusting output. The output adjustment seems to be short-lived and thus does not help remove the price pressure.
Inventory, Price, and Output in the Linerboard Industry, 2006 Papermakerâs Conference
