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Non Linear Price Elasticities. Edition No. 1
VDM Publishing House, June 2009, Pages: 316
Price elasticities and cross-price elasticities have
typically been assumed to be constant for all price
changes, when modelling market shares. Yet there is
increasing evidence that deep price cuts and heavy
promotions have a disproportionate effect, which
depends on where a brand is positioned in the market.
In this book, the breakfast cereal market is being
studied. Weekly scanner data were analysed using
multilevel modeling methods to provide a complete
understanding of this market. The effects of price
changes and promotions are estimated by using dummy
variables for own and competitive products’ price
changes and promotions for the product modelled.
Price decreases and price increases are modelled
separately to find out whether consumers react in
different ways to price increases and price
decreases. The results show strong evidence that the
percentage change in price has a non-linear effect on
the percentage change in share for the own price
effects. This book is useful for graduate and
upper-level undergraduate students and researchers in
Marketing Research.
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