Price elasticity dynamics over the product life cycle: A study of consumer durables

Extending the work of Parker (1992), which considers only first purchases, and Simon (1989), which considers brand-level sales, we empirically provide support for the hypothesis that total category sales price elasticities first decease in absolute value but then ultimately increase if the product in question faces the decline phase of the product life cycle (due to competitive substitutes, changes in tastes, and so on). As an interesting artifact of the methodology, the article also shows how the Bass model can be easily modified to account for total category sales (first plus repeat purchases) and that, in the limit, 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 the time series studied exceeds five to ten years for consumer durables.