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Using demand transfer ratios to infer market impacts of new goods

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  • Gayle, Philip G.
  • Lin, Ying

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.

Suggested Citation

  • Gayle, Philip G. & Lin, Ying, 2023. "Using demand transfer ratios to infer market impacts of new goods," Economics Letters, Elsevier, vol. 223(C).
    • Handle: RePEc:eee:ecolet:v:223:y:2023:i:c:s016517652200444x
    DOI: 10.1016/j.econlet.2022.110970
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    2. Hausman, Jerry, 1999. "Cellular Telephone, New Products, and the CPI," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(2), pages 188-194, April.
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    More about this item

    Keywords

    Demand transfer ratios; New product introduction; Aggregate demand expansionary effect; Demand-cannibalizing effect; Innovation and Technological Change; Environmental Policy;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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