Using Demand Transfer Ratios to Infer Market Impacts of New Goods

Gayle, Philip and Lin, Ying (2022): Using Demand Transfer Ratios to Infer Market Impacts of New Goods. Forthcoming in: Economics Letters

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Demand transfer ratios; New product introduction; Aggregate demand expansionary effect; Demand-cannibalizing effect; Innovation and Technological Change; Environmental Policy
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D11 - Consumer Economics: Theory; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M3 - Marketing and Advertising > M31 - Marketing; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q55 - Technological Innovation; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy

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