Input substitution and relative input price variability in timber markets

Timbers of multiple tree species and sizes are often traded in a single market. Some previous studies have empirically examined their price interdependences, but the drivers such relationships remain unclear. I demonstrated with rational expectations model that when timbers two (or sizes) were gross substitutes production, steady-state ratio between prices was dependent on relative quality ease substitution production. The input variability — variance deviation from its value function shocks growth demand for output, negatively related to substitution. A case study illustrated pine (Pinus L.) pulpwood hardwood pulpwood, as well variance, drastically decreased during period 2001–2016, compared 1986–2000, United States South, whereas chip-n-saw more stable. One possible explanation emergence novel forest products may altered substitutability manufacturing process.