Estimating Automotive Elasticities from Segment Elasticities and First Choice/Second Choice Data

Abstract

Of the share lost to one product because of a price change, diversion fractions are the fractions of that lost share going to each of the other products. This paper expresses product cross-elasticities in terms of diversion fractions and a scaling factor. Since the automotive market includes more than two-hundred products, time-series data are insufficient for estimating all elasticities. Instead, this paper estimates automotive elasticities by specifying the diversion fractions using cross-sectional first choice/second choice data and estimating the remaining scaling factor and own-elasticities using more aggregate elasticities estimated from time series. Copyright 1993 by MIT Press.