The objective of this paper is to characterize the timber demand and supply market structures in terms of the corresponding price elasticities. We focused on the domestic lumber as well as the lumber processed from the imported US logs in eight regional markets, i.e., Tohoku, Kanto, Hokuriku, Chubu, Kinki, Chugoku, Shikoku and Kyushu. We applied the ordinary least squares method (OLS), and the two stage and three stage least squares methods (25L5&35L5) to estimate the parameters of demand and supply functions for each product. Our comparative analyses showed that all estimates of price elasticities for demand by the 2SLS and 3SLS are larger than those by the OLS, and that it becomes more than 2.0 in Tohoku, Kanto, Hokuriku, Kinki and Chugoku. Note that all exogenous variables in both demand and supply functions are used as an instrumental variable for the 2SLS and 3SLS. It is also shown that in each regional market, supply for the domestic lumber is less elastic than that for the lumber processed from the imported US logs, implying that the domestic lumber supply does not reflect changes in the market enough, compared to the other. This tendency is observed for all methods applied here.

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