To simplify our discussion about a store's price response, we develop an overall measure of the store's response to proportional price movements (i.e., the category elasticity). (See also Hoch et al. 1995.) The motivation of the category elasticity is to measure the effect on movement of a 1% increase (or decrease) of all the prices in the category. Our primary purpose is to construct a summary measure for labeling each store as price sensitive or insensitive. Formally the category elasticity is:

Where is the total category movement, is the vector of movement market shares, is the cross elasticity matrix evaluated at the average price for store s, and is a vector of ones.

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