IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2402.05152.html
   My bibliography  Save this paper

Is the price right? Reconceptualizing price and income elasticity to anticipate price perception issues

Author

Listed:
  • Shawn Berry

Abstract

Price perception by consumers represents a challenge to the ability of a business to correctly and profitably price and sell their products or services in a given market and any new target market. Complicating the perception of prices is the dynamics of price and income elasticity, both of which are key for estimating demand. This article proposes a novel and elegant identity that conceptualizes elasticity as a means of quantifying the potential for price perception problems in a market. Elasticity studies from 1990 to 2023 (n=30) were sampled to evaluate the relationship between price and income elasticity for various consumer commodities using the identity. The results suggest that, given known price and income elasticity values, a business can anticipate pricing perception problems in advance and address the potential for damaging distortion of their value proposition. Further, the business can use this insight to correctly choose a strategic pricing approach.

Suggested Citation

  • Shawn Berry, 2024. "Is the price right? Reconceptualizing price and income elasticity to anticipate price perception issues," Papers 2402.05152, arXiv.org, revised Feb 2024.
  • Handle: RePEc:arx:papers:2402.05152
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2402.05152
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gallet, Craig A. & Doucouliagos, Hristos, 2014. "The income elasticity of air travel: A meta-analysis," Annals of Tourism Research, Elsevier, vol. 49(C), pages 141-155.
    2. Cleasby, R. C. G. & Ortmann, G. F., 1991. "Research Note: Demand Analysis Of Eggs In South Africa," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 30(1), March.
    3. Lorenzo Sabatelli, 2016. "Relationship between the Uncompensated Price Elasticity and the Income Elasticity of Demand under Conditions of Additive Preferences," PLOS ONE, Public Library of Science, vol. 11(3), pages 1-11, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Graziella Bonanno & Lucia Errico & Nadia Fiorino & Roberto Ricciuti, 2024. "The Impact of Government Size on Corruption: A Meta-Regression Analysis," CESifo Working Paper Series 10956, CESifo.
    2. repec:wly:econjl:v::y:2017:i:605:p:f236-f265 is not listed on IDEAS
    3. Wang, Sen & Gao, Yi, 2021. "A literature review and citation analyses of air travel demand studies published between 2010 and 2020," Journal of Air Transport Management, Elsevier, vol. 97(C).
    4. Miller, Benjamin I. & Dewey, James F. & Denslow, David & Miller, Edward B., 2016. "A welfare analysis of subsidies for airports," Journal of Air Transport Management, Elsevier, vol. 50(C), pages 83-90.
    5. Wu, Hanjun & Hong Tsui, Kan Wai & Ngo, Thanh & Lin, Yi-Hsin, 2020. "Impacts of aviation subsidies on regional wellbeing: Systematic review, meta-analysis and future research directions," Transport Policy, Elsevier, vol. 99(C), pages 215-239.
    6. Bruderer Enzler, Heidi, 2017. "Air travel for private purposes. An analysis of airport access, income and environmental concern in Switzerland," Journal of Transport Geography, Elsevier, vol. 61(C), pages 1-8.
    7. Francesco Aiello & Graziella Bonanno, 2018. "On The Sources Of Heterogeneity In Banking Efficiency Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 32(1), pages 194-225, February.
    8. Panagiotis Fragkos, 2022. "Decarbonizing the International Shipping and Aviation Sectors," Energies, MDPI, vol. 15(24), pages 1-25, December.
    9. Helena Nemec Rudez, 2018. "The Relationship between Income and Tourism Demand: Old Findings and New Research," Academica Turistica - Tourism and Innovation Journal, University of Primorska Press, vol. 11(1), pages 67-73.
    10. Oladosu, Gbadebo A. & Leiby, Paul N. & Bowman, David C. & Uría-Martínez, Rocio & Johnson, Megan M., 2018. "Impacts of oil price shocks on the United States economy: A meta-analysis of the oil price elasticity of GDP for net oil-importing economies," Energy Policy, Elsevier, vol. 115(C), pages 523-544.
    11. Hanson, Daniel & Toru Delibasi, Tuba & Gatti, Matteo & Cohen, Shamai, 2022. "How do changes in economic activity affect air passenger traffic? The use of state-dependent income elasticities to improve aviation forecasts," Journal of Air Transport Management, Elsevier, vol. 98(C).
    12. Ashrafi Tannaz Alizadeh & Myrland Øystein, 2017. "Determinants of trip duration for international tourists in Norway; a parametric survival analysis," European Journal of Tourism, Hospitality and Recreation, Sciendo, vol. 8(1), pages 75-86, May.
    13. Nenem, Sukru & Graham, Anne & Dennis, Nigel, 2020. "Airline schedule and network competitiveness: A consumer-centric approach for business travel," Annals of Tourism Research, Elsevier, vol. 80(C).
    14. Fouquet, Roger & O'Garra, Tanya, 2022. "In pursuit of progressive and effective climate policies: Comparing an air travel carbon tax and a frequent flyer levy," Energy Policy, Elsevier, vol. 171(C).
    15. Francesco Aiello & Graziella Bonanno, 2019. "Explaining Differences In Efficiency: A Meta‐Study On Local Government Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 33(3), pages 999-1027, July.
    16. John P. A. Ioannidis & T. D. Stanley & Hristos Doucouliagos, 2017. "The Power of Bias in Economics Research," Economic Journal, Royal Economic Society, vol. 127(605), pages 236-265, October.
    17. Rockie U Kei Kuok & Tay T.R. Koo & Christine Lim, 2024. "Air transport capacity and tourism demand: A panel cointegration approach with cross-sectionally augmented autoregressive distributed lag (CS-ARDL) model," Tourism Economics, , vol. 30(3), pages 702-727, May.
    18. Gallet, Craig A. & Doucouliagos, Hristos, 2017. "The impact of healthcare spending on health outcomes: A meta-regression analysis," Social Science & Medicine, Elsevier, vol. 179(C), pages 9-17.
    19. Escañuela Romana, Ignacio, 2018. "La elasticidad precio de la demanda de transporte aéreo de pasajeros en los Estados Unidos [The price elasticity of demand for air travel in the United States]," MPRA Paper 83572, University Library of Munich, Germany.
    20. Becken, Susanne & Carmignani, Fabrizio, 2020. "Are the current expectations for growing air travel demand realistic?," Annals of Tourism Research, Elsevier, vol. 80(C).
    21. Gao, Yi, 2020. "Estimating the sensitivity of small airport catchments to competition from larger airports: A case study in Indiana," Journal of Transport Geography, Elsevier, vol. 82(C).

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2402.05152. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.