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An empirical relationship between price elasticity and price levels

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  • Hongjai Rhee

Abstract

This study examines price competition between Duty-Free Stores (DFSs). The primary research question is the relationship between the own- and cross-store price elasticities, on the one hand, and the average price levels of DFS products, on the other hand. Using a unique data set of DFS sales in Korea combined with a hierarchical Bayesian model, we show that the own- and cross-store price elasticities increase significantly with the average price level.

Suggested Citation

  • Hongjai Rhee, 2013. "An empirical relationship between price elasticity and price levels," Applied Economics Letters, Taylor & Francis Journals, vol. 20(2), pages 190-193, February.
    • Handle: RePEc:taf:apeclt:v:20:y:2013:i:2:p:190-193
    DOI: 10.1080/13504851.2012.689101
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    1. Aviv Nevo, 2000. "Mergers with Differentiated Products: The Case of the Ready-to-Eat Cereal Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 395-421, Autumn.
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