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A Product Diffusion Approach to Modeling Softwood Lumber Demand

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Abstract:

The price elasticity of demand plays an important role in determining softwood lumber consumption. The specification of this relationship is of special interest to national assessment methodology since, in the long-range projections employed there, the demand elasticity is necessary to determine the full impacts of policy alternatives. The present study was conducted to determine how technological change has affected the response of softwood lumber demand to its price since World War II. Consumption of softwood lumber was broken down by individual end-use sectors. Prices of key substitutes were compiled for the periods over which they actively competed with lumber for various end-use markets. A model, based on product diffusion, was formulated and applied to the data. Statistical regressions were used to estimate the parameters of the diffusion processes. The results of the analysis indicate that the price elasticity of demand for softwood lumber has declined since World War II. The culmination of several major substitution trends, together with the absence of significant new technologically induced substitutions, brought about the change. The analysis indicates that projections of future price elasticities should be made in the context of the technologies that are expected to play a market role in the projection interval. Forest Sci. 31:685-700.

Keywords: Consumption; demand; diffusion; price elasticities

Document Type: Journal Article

Affiliations: Economist, USDA Forest Service, Forest Products Laboratory, One Gifford Pinchot Drive, Madison, WI 53705-2398

Publication date: 1985-09-01

More about this publication?
  • Forest Science is a peer-reviewed journal publishing fundamental and applied research that explores all aspects of natural and social sciences as they apply to the function and management of the forested ecosystems of the world. Topics include silviculture, forest management, biometrics, economics, entomology & pathology, fire & fuels management, forest ecology, genetics & tree improvement, geospatial technologies, harvesting & utilization, landscape ecology, operations research, forest policy, physiology, recreation, social sciences, soils & hydrology, and wildlife management.
    Forest Science is published bimonthly in February, April, June, August, October, and December.

    2015 Impact Factor: 1.702
    Ranking: 16 of 66 in forestry

    Also published by SAF:
    Journal of Forestry
    Other SAF Publications
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