Abstract
This paper develops the Latent Symmetric Elasticity Structure (LSES), a market share price elasticity model which allows elasticities to be decomposed into two components: a symmetric substitution index revealing the strength of competition between brand pairs, and a brand-specific coefficient revealing the overall impact of a brand on its competitors. An application of the model to unconstrained cross price elasticities shows that brand-price competition in one market is well-represented by a LSES model in which brand substitutability and elasticity asymmetry are related to average price level.
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This research was supported by the Dean's Fund for Faculty Research of the Owen School.
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Russell, G.J. A model of latent symmetry in cross price elasticities. Marketing Letters 3, 157–169 (1992). https://doi.org/10.1007/BF00993995
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DOI: https://doi.org/10.1007/BF00993995