Price Elasticity Of Consumption Research Articles

An Empirical Analysis of the Relationship Between Brand Loyalty and Consumer Price Elasticity

This empirical paper explores the relationship between consumer brand preference or loyalty and price elasticity in purchase behavior. This behavior is conceptualized as resulting from two distinct but related decisions, namely a brand choice decision and a purchase quantity decision. We argue that loyal consumers will be less price sensitive in the choice decision than nonloyal consumers. However, this direction is expected to be reversed in the quantity decision with loyal consumers expected to be more price sensitive than nonloyal consumers. We model the choice and quantity decisions jointly using the limited dependent variable framework described in Krishnamurthi and Raj. The data used are diary panel data on a frequently purchased product class from BURKE and caffeinated ground coffee scanner data from IRI. We show that loyals are less price sensitive than nonloyals in the choice decision but more price sensitive in the quantity decision. Managerial implications of the differing elasticities are discussed.

Competition as a Moderator of the Effect of Advertising on Sales

The author investigates the impact of competition on the sales response function. In particular, the influence of advertising on consumers’ price sensitivity (elasticity) is explored. Two opposing schools of thought, information theory and market power theory, explain how advertising changes consumer price elasticity. These two theories provide conflicting predictions of the direction of change in price sensitivity. The author proposes and estimates a model specifying conditions under which one of the two theories would apply. The impact of advertising on other parameters of the sales response function also is examined. The crucial determinant of the sign of these coefficients is competitive reactivity. An operational definition of this construct is proposed, and the hypotheses are tested empirically by an analysis of airline industry data.

Bank Interchange of Transactional Paper: Legal and Economic Perspectives

Bank Interchange of Transactional Paper: Legal and Economic Perspectives