S2Eight regional demand and supply equations for pallets were developed in this study. Demand for pallets is affected by the price pallet users receive for their products, the price pallet users pay for labor, and past price of labor versus the cost of new capital equipment as approximated by interest rates. Pallet production is affected by pallet price, past lumber price, past wage rates in the pallet industry, and an index of labor productivity. Results indicate that forces outside of the pallet market tend to influence pallet demand, while forces inside of the pallet market greatly influence pallet supply. However, since the level of demand has a great deal of influence on pallet price, it is concluded that the pallet market is strongly influenced by overall general economic activity, while it is only weakly influenced by activity within the forest products markets.S3.