Kim, Chul
[VerfasserIn]
;
Smith, Adam N.
[Sonstige Person, Familie und Körperschaft];
Kim, Jaehwan
[Sonstige Person, Familie und Körperschaft];
Allenby, Greg M.
[Sonstige Person, Familie und Körperschaft]
Capturing Flexible Price Elasticities in Direct Utility Models
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments February 6, 2020 erstellt
Beschreibung:
This paper investigates the role of the outside good utility function on admissible substitution patterns in direct utility models of discrete/continuous demand. We first present a set of novel results that characterize the functional form of price effects within this class of models. The results highlight the relative inflexibility of many standard outside good utility functions. We then propose a new outside good utility function that admits more flexible marginal utility curves. Our empirical analysis uses household scanner panel data from the potato chip category, where we find empirical support for non-standard rates of satiation for the outside good. We then show how the restrictive substitution patterns induced by standard utility specifications may distort price elasticities and optimal pricing decisions