Abstract
Extending the work of Parker (1992), which considers only firstpurchases, and Simon (1989), which considers brand-level sales, weempirically provide support for the hypothesis that total categorysales price elasticities first decease in absolute value but thenultimately increase if the product in question faces the decline phaseof the product life cycle (due to competitive substitutes, changes intastes, and so on). As an interesting artifact of the methodology, thearticle also shows how the Bass model can be easily modified to accountfor total category sales (first plus repeat purchases) and that, in thelimit, the Bass model converges to stochastic repeat purchase models(bridging two radically different modeling traditions). If unadjusted,the Bass model applied to sales data is grossly misspecified when thetime series studied exceeds five to ten years for consumer durables.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Bass, Frank M. (1969). “A New Product Growth Model for Consumer Durables.” Management Science 15, 215–227.
Bayus, Barry L. (1994). “Are Product Life Cycles Really Getting Shorter?” Journal of Product Innovation Management 11 (September), 300–308.
Easingwood, Christopher, Vijay Mahajan, and Eitan Muller. (1983). “A Nonuniform Influence Innovation Dif-fusion Model of New Product Acceptance.” Marketing Science 2 (Summer), 273–296.
Erenberg, A. S. C. (1988). Repeat Buying: Theory and Applications. New York: North Holland.
Jain, Dipak C., and Ram C. Rao. (1990). “Effect of Price on the Demand for Durables: Modeling, Estimation and Findings.” Journal of Business and Economic Statistics 8(2) (April), 163–170.
Kalish, Shlomo. (1983). “Monopolist Pricing with Dynamic Demand and Production Cost.” Marketing Science 2, 135–160.
Kamakura, Wagner A., and Siva K. Balasubramanian. (1987). “Long-Term Forecasting with Innovation Diffu-sion Models: The Impact of Replacement Purchases.” Journal of Forecasting 6, 1–19.
Kamakura, Wagner A., and Siva K. Balasubramanian. (1988). “Long-Term View of the Diffusion of Durables.” International Journal of Research in Marketing 5, 1–13.
Parker, Philip M. (1992). “Price Elasticity Dynamics Over the Adoption Life Cycle.” Journal of Marketing Research 29 (August), 358–367.
Pesaran, M. H., and A. S. Deaton. (1978). “Testing Nonnested Nonlinear Regression Models.” Econometrica 46, 677–694.
Robertson, Thomas S. (1967). “Determinants of Innovative Behavior.” In Reed Moyer (ed.), Proceedings of the American Marketing Association (pp. 328–332). Chicago: American Marketing Association.
Rogers, Everett M. (1983). Diffusion of Innovations (3rd ed.). New York: Free Press.
Schmittlein, David C., and Vijay Mahajan. (1982). “Maximum Likelihood Estimation for an Innovation Diffu-sion Model of New Product Acceptance.” Marketing Science 1 (Winter), 57–78.
Simon, Hermann. (1989). Price Management. Amsterdam: North Holland, Elsevier.
Srinivasan, V., and Charlotte H. Mason. (1986). “Nonlinear Least Squares Estimation of New Product Diffusion Models.” Marketing Science 5 (Spring), 169–178.
Tellis, Gerard J. (1988). “The Price Elasticity of Selective Demand: A Meta-Analysis of Econometric Models of Sales.” Journal of Marketing Research 25 (November), 331–341.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
PARKER, P., NEELAMEGHAM, R. Price Elasticity Dynamics over the Product Life Cycle: A Study of Consumer Durables. Marketing Letters 8, 205–216 (1997). https://doi.org/10.1023/A:1007962520455
Issue Date:
DOI: https://doi.org/10.1023/A:1007962520455