Timber appraisal from French public auctions: how to set the reserve price when there are unsold lots?

Summary Estimating the value of standing timber is an important topic for the national forest services to set an appropriate withdrawal price and obtain a fair price. The hedonic pricing method is particularly well suited for valuing standing timber lots because many characteristics influence the price. We propose an estimation model based on the results of timber auctions conducted by the Office National des Forêts (ONF). However, many lots remain unsold at the end of these sales. In addition, the withdrawal price is not announced. We correct the bias due to the presence of unsold lots with the Heckman selection model and study the variables that determine the probability of selling a lot as well as the implicit price of the lot characteristics.