Identifying Competition Structure from Cross Price Elasticity Matrix

Abstract

Analysis of competition structure among products in a product category has been

an important issue in the marketing area since the accurate assessment of market

structure is critical in developing competitive advantages of a firm. The meaningful

characterization of competition structure among products in a market helps firms

evaluate the effectiveness of marketing efforts and identify new opportunities. I

develop a simple procedure for obtaining brand positions from aggregate sales data

by imposing some restrictions on cross price elasticity matrix. The proposed procedure

provides useful information on vulnerability and clout structure among products in

a market and the cross price elasticity matrix is the only input for obtaining such

information. So the input requirement in implementing the proposed model is relatively

minimal since the cross price elasticity information is easily obtained from standard

syndicated data sets.