The Korean pulp and paper industry is facing a rapidly changing commercial environment with reductions in import tariffs, revaluation of the domestic currency, and a fast growing economy. This study has three objectives : first, to understand the Korean pulp and paper industry and market structure : second, to measure quantitatively the behavior of each participant in the market in order to build a simulation market model ; and third, to simulate the impact of changes in exogenous variables such as GDP, import tariffs, and the exchange rate. The Korean pulp and paper industry has developed as an import substitute industry with strong support from the Government, primarily in lieu of high tariffs on foreign products and price-support regulations for the domestic pulp mill, Thus, some sectors of the domestic pulp and paper market are less competitive. The Korean paper industry depends heavily on foreign suppliers for their fiber requirements. This lack of self-sufficiency is due mainly to the poor forest resource of the country, a condition that will not change in the near future, considering both rising labor costs and rough terrain of the forestlands. The demand for paper was found to be inelastic with respect to its price and to the price of substitutes, while the demand for paperboard is elastic with respect to its price. The supply of both paper and paperboard was found to be elastic with respect to price and cost, while that of paperboard is more elastic than paper. The demand for both pulp and wastepaper is inelastic with respect to their prices. And the supply of domestic pulp and wastepaper is inelastic with respect to their prices. The Korean pulp and paper industry has grown with the rapidly growing demand. This was confirmed by the GDP elasticities of paper and paperboard being greater than unity, and by the investment decision model estimated. However, this may not continue to be true in the future if competition from foreign producers becomes more intensive. The result of scenario analysis indicates that the Korean paper and paperboard market will become more competitive, and may provide more opportunities for international trade.