NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Empirical Properties of Diversion Ratios

Christopher T. Conlon, Julie Holland Mortimer

NBER Working Paper No. 24816
Issued in July 2018, Revised in September 2020
NBER Program(s):Industrial Organization

The diversion ratio for products j and k can be interpreted as the result of an experiment: increase the price of product j, measure the number of consumers who leave product j, and then measure the fraction of leavers who switch to a substitute product k. In theory, this is expressed as the ratio of demand derivatives that enter the multi-product Bertrand-Nash first-order condition for a firm. In practice, diversion ratios are also measured from second-choice data or customer switching surveys. We establish a LATE interpretation of diversion ratios, and show how diversion ratios can be obtained from different interventions (price changes, quality changes, assortment changes) and how those different measures relate to one another and to the underlying properties of demand.

download in pdf format
   (726 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w24816

 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us