Price Elasticity Dynamics over the Adoption Life Cycle

Abstract

Little empirical research has been conducted to test the dynamic behavior of elasticities over the product life cycle. Competing specifications of price elasticity dynamics are examined to test the prevailing hypothesis that elasticities increase over the adoption life cycle or diffusion process. Though not supporting the hypothesis, the empirical results suggest that certain factors, including the degree to which a product is a necessity and faces competitive substitutes, affect elasticity dynamics.