Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/241932 
Authors: 
Year of Publication: 
2020
Series/Report no.: 
cemmap working paper No. CWP57/20
Publisher: 
Centre for Microdata Methods and Practice (cemmap), London
Abstract: 
This paper develops a new approach that combines firm margins, market-level industry data and a static demand model to construct sets containing unbiased estimates of long-run price elasticities for storable good industries. It obviates the need to solve the consumer's value function and can be completed within a policy-making timeframe. This methodology allows for the effect of contemporaneous and inter-temporal substitution on pricing incentives to be measured by dynamic diversion ratios. Together with the margins, these are key inputs into a new price pressure test for mergers in industries with dynamic demand. This framework is applied to the UK laundry detergent industry from 2002 to 2012. I conduct two policy experiments that show how estimated sets of bias-corrected price elasticities and diversion ratios can be used to avoid misguided policy-decisions. In both cases demonstrating the efficacy of set-valued policy tools.
Subjects: 
dynamic demand
storable goods
price elasticities
diversionratios
GUPPI
JEL: 
D12
C54
L11
L40
L67
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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