On decomposing the elasticity of demand

On decomposing the elasticity of demand

by Thomas Steenburgh

Part of Working paper / Division of Research, Harvard Business School -- 05-074

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In this article, I compare three methods of decomposing the elasticity of own-good demand. The first two methods attribute growth in own-good demand to changes in demand for competing goods, and the third method attributes growth to changes in consumers' decisions. Two of the three methods have not been precisely interpreted, but I show that all are accurate as long as precise interpretations are given to them.

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