Empirical Properties of Diversion Ratios / Christopher T. Conlon, Julie Holland Mortimer.

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Conlon, Christopher T

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w24816.Publication details: Cambridge, Mass. National Bureau of Economic Research 2018.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: The diversion ratio for products j and k can be interpreted as the result of an experiment: increase the price of product j, measure the number of consumers who leave product j, and then measure the fraction of leavers who switch to a substitute product k. In theory, this is expressed as the ratio of demand derivatives that enter the multi-product Bertrand-Nash first-order condition for a firm. In practice, diversion ratios are also measured from second-choice data or customer switching surveys. We establish a LATE interpretation of diversion ratios, and show how diversion ratios can be obtained from different interventions (price changes, quality changes, assortment changes) and how those different measures relate to one another and to the underlying properties of demand.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w24816 (Browse shelf(Opens below))	Not For Loan

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July 2018.

The diversion ratio for products j and k can be interpreted as the result of an experiment: increase the price of product j, measure the number of consumers who leave product j, and then measure the fraction of leavers who switch to a substitute product k. In theory, this is expressed as the ratio of demand derivatives that enter the multi-product Bertrand-Nash first-order condition for a firm. In practice, diversion ratios are also measured from second-choice data or customer switching surveys. We establish a LATE interpretation of diversion ratios, and show how diversion ratios can be obtained from different interventions (price changes, quality changes, assortment changes) and how those different measures relate to one another and to the underlying properties of demand.