Using demand transfer ratios to infer market impacts of new goods

Philip Gayle () and Ying Lin

Economics Letters, 2023, vol. 223, issue C

Abstract: This paper introduces a measure we call a “demand transfer ratio” (DTR) that is a useful metric for inferring and communicating important market impacts associated with new product introductions. We show that the sign and magnitude of the demand transfer ratio can be used to infer whether the presence of new goods expanded aggregate demand in the relevant market and/or have a demand-cannibalizing effect on pre-existing products. In principle, our unit free DTR metric can be computed for the introduction and presence of new products across a wide cross section of industries for the purpose of comparing the demand transference impacts of various technology innovations and further studying what measurable attributes, strategies, and/or policies are associated with the most impactful innovations in an economy.

Keywords: Demand transfer ratios; New product introduction; Aggregate demand expansionary effect; Demand-cannibalizing effect; Innovation and Technological Change; Environmental Policy (search for similar items in EconPapers)
JEL-codes: D11 L13 M31 O33 Q55 Q58 (search for similar items in EconPapers)
Date: 2023
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Working Paper: Using Demand Transfer Ratios to Infer Market Impacts of New Goods (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:223:y:2023:i:c:s016517652200444x

DOI: 10.1016/j.econlet.2022.110970

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