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Product Similarity and Cross-Price Elasticity

Author

Listed:
  • Sreya Kolay

    (University of California Irvine)

  • Rajeev K. Tyagi

    (University of California Irvine)

Abstract

We use a spatial competition model to show how an increasing similarity between two products can monotonically increase, monotonically decrease, or have a non-monotonic effect on cross-price elasticity. We relate these results to prior research that links cross-price elasticity to product similarity, and the literature on market structure, merger analysis, and price discrimination.

Suggested Citation

  • Sreya Kolay & Rajeev K. Tyagi, 2018. "Product Similarity and Cross-Price Elasticity," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(1), pages 85-100, February.
    • Handle: RePEc:kap:revind:v:52:y:2018:i:1:d:10.1007_s11151-017-9578-8
    DOI: 10.1007/s11151-017-9578-8
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    References listed on IDEAS

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    6. Werden, Gregory J & Froeb, Luke M, 1994. "The Effects of Mergers in Differentiated Products Industries: Logit Demand and Merger Policy," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 10(2), pages 407-426, October.
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    8. Pinkse, Joris & Slade, Margaret E., 2004. "Mergers, brand competition, and the price of a pint," European Economic Review, Elsevier, vol. 48(3), pages 617-643, June.
    9. Jerry A. Hausman & Gregory K. Leonard, 2005. "Competitive analysis using a flexible demand specification," Journal of Competition Law and Economics, Oxford University Press, vol. 1(2), pages 279-301.
    10. Werden, G.J., 1992. "The History of Antitrust Market Delineation," Papers 92-8, U.S. Department of Justice - Antitrust Division.
    11. de Juan, Rebeca, 2003. "The independent submarkets model: an application to the Spanish retail banking market," International Journal of Industrial Organization, Elsevier, vol. 21(10), pages 1461-1487, December.
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    Cited by:

    1. Richard Friberg & Frode Steen & Simen A. Ulsaker, 2022. "Hump-Shaped Cross-Price Effects and the Extensive Margin in Cross-Border Shopping," American Economic Journal: Microeconomics, American Economic Association, vol. 14(2), pages 408-438, May.

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