Identification of the economically efficient sources of wood for a large pulp mill in Argentina

An economic model of a long run profit maximization from forestry activities by a large pulp mill, a price leading oligopsonist, in Argentina is suggested. An equilibrium outcome of the model is determined by formulating the two interactive linear programming models and solving them iteratively. The tactical as well as strategic planning issues are incorporated in the model. The results indicate that even when the mill’s cost of planting is slightly higher than the farmer’s cost, the self supply of the wood increases with time. In about 30 years time, the mill may end up producing most of its wood demand and also sell some to other small processing facilities.