Elasticity cross

Substitution Effects and Cross-elasticities. Patient-doctor Interaction... 

The volume of a product is also related to P , the price of competitive or synergistic products. The cross-elasticity of volume to a change in the price of a competitive product is... 

Two of the three diagonals have the wrong sign. This may be due to the very small sample size. The cross elasticities however do conform to what one might expect, the primary one being the evident substitution between capital and fuel. 

Fuels that are hard to substitute with each other may have elastic demand with respect to changes in own price or income, but will have low (close to zero) cross-elasticities of demand. Such fuels will not be in the same market and would not compete with each other within their respective markets, however, there may still be strong same-fuel competition. To illustrate, let quantity demanded of gas Qg be determined by its own price Pg, prices of oil P , power Pp, coal Pc and income Y ... 

When no substitutes to gas exist, gg-- y, when perfect substitutes exist (e.g. egp=oc), g=oo. Most short-run cross-elasticities have been found to be <0.15, and majority long-run elasticities for various fuels have been found to be well below unit (cf Tables 6-8). On the other hand, good substitutes are perceived to have cross-elasticities 1. 

Table 6 Cross elasticities of fuels in the industrial sector of the US, 1970-1985. Source ...

Table 7 Cross-elasticities of fuels. Source See Table 6...

Some products are complementaty and are used jointly, so that a decrease in price for one product may increase the demand for another. For example, automobiles and antifreeze are complementary products. Other products are substitutes that is, an increase in price for one product may increase the demand for the other. For example, nylon and polyester shirts are substitute products. The influence of one product s price F, on another product s demand is measured by the cross-elasticity ... 

The effect of brand A s promotions on brand B s sales likely is different than the effect of brand B s promotions on brand A s sales. This asymmetry of the promotion cross-elasticities is a very important managerial finding. That is, a strong brand, say brand A, may be more successful in inducing buyers of brand B to switch to brand A with a promotion than the weaker biand B would be in using a similar promotion to induce buyers of brand A to switch to brand B. This finding imphes that when there are simultaneous promotions by both brands, brand A likely will experience a more positive sales impact than will brand B. 

Very few papers to date have considered multiple products that share a common resource such as production capacity. This problem becomes even more difficult when there are interactions among products, such as demand diversions or cross-elasticities, but many companies are quite interested in these interaction effects. It may also be possible to bundle multiple products and determine pricing and production policies in a way that make the system more efficient. Also, determining pricing and production strategies when common components of limited supply make up numerous products is an interesting topic. 

Modeling these types of pricing strategies would most likely require some combination of more time periods, more price variables and all the ancillary demand elasticities and cross-elasticities, and more detailed models of consumer behavior and preferences. 

In the above equations S represents the total market potential and / is the price elasticity factor. The parameters u and 0 capture two different aspects of differentiation the absolute difference in demand and the substitutability of the end products as reflected by the cross elasticity. Changes in u alter the relative product preferences in a way that preserve own- and cross-price elasticity, although the rates of change of quantities with respect to price are affected. The parameter 0, in contrast, affects the substitutability of the two products in terms of changes in prices. More specifically, 0 is the ratio of the rate of change of quantity with respect to the price in the other channel to the... 

The model is based on the principle of influence of each charge on the other but not on itself (nonzero mutual influence and zero self-influence), resulting at the global level in each electrical potential equal to a cross-elastance applied to the charge of the other pole. 

To obtain some idea regarding the changes in availability, one should compare the specific consumption by the rubber industry versus the overall consumption in nonrubber applications. This will give the reader some idea of the cross-elasticity of demand between rubber and nonrubber sectors for a given intermediate and its vulnerability to changes in availability and price. It should also be noted that many of these intermediate feedstocks are held captive by the chemical manufacturer, to be used exclusively to synthesize other chemical products. However, sometimes these manufacturers sell these feedstocks to distributors. In other cases, these feedstocks are sold directly to other chemical manufacturers. These other manufacturers might even have a pipeline directly from the nearby supplier. 

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