Empirical properties of diversion ratios

Christopher Conlon and Julie Mortimer

RAND Journal of Economics, 2021, vol. 52, issue 4, 693-726

Abstract: The diversion ratio for products j and k is the fraction of consumers who leave product j after a price increase and switch to product k. Theoretically, it is expressed as the ratio of demand derivatives from a multi‐product firm's Bertrand‐Nash first‐order condition. 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 are obtained from different interventions (price, quality, or assortment changes) and how those measures relate to one another and to underlying properties of demand.

Date: 2021
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Citations: View citations in EconPapers (15)

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https://doi.org/10.1111/1756-2171.12388

Related works:
Working Paper: Empirical Properties of Diversion Ratios (2019)
Working Paper: Empirical Properties of Diversion Ratios (2018)
Working Paper: Empirical Properties of Diversion Ratios (2018)
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