Price Elasticity Dynamics over the Product Life Cycle: A Study of Consumer Durables

Extending the work of Parker (1992), which considers only firstpurchases, and Simon (1989), which considers brand-level sales, weempirically provide support for the hypothesis that total categorysales price elasticities first decease in absolute value but thenultimately increase if the product in question faces the decline phaseof the product life cycle (due to competitive substitutes, changes intastes, and so on). As an interesting artifact of the methodology, thearticle also shows how the Bass model can be easily modified to accountfor total category sales (first plus repeat purchases) and that, in thelimit, the Bass model converges to stochastic repeat purchase models(bridging two radically different modeling traditions). If unadjusted,the Bass model applied to sales data is grossly misspecified when thetime series studied exceeds five to ten years for consumer durables.