An empirical relationship between price elasticity and price levels

Hongjai Rhee

Applied Economics Letters, 2013, vol. 20, issue 2, 190-193

Abstract: This study examines price competition between Duty-Free Stores (DFSs). The primary research question is the relationship between the own- and cross-store price elasticities, on the one hand, and the average price levels of DFS products, on the other hand. Using a unique data set of DFS sales in Korea combined with a hierarchical Bayesian model, we show that the own- and cross-store price elasticities increase significantly with the average price level.

Date: 2013
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DOI: 10.1080/13504851.2012.689101

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