2266. Ranking products as substitutes based on the stability of their relations with other products upon aggregation
Invited abstract in session WC-61: Behavioural studies in cognate domains 2, stream Behavioural OR.
Wednesday, 12:30-14:00Room: Maurice Keyworth G.31
Authors (first author is the speaker)
| 1. | Petr Krautwurm
|
| Econometrics department, University of economics in Prague |
Abstract
This paper introduces a novel method to rank products as substitutes by examining how their relationships with other goods—specifically, whether they function as substitutes or complements—change upon aggregation. The approach builds on the idea that products close to perfect substitutes are perceived by consumers as essentially the identical, indistinguishable product, and thus should exhibit minimal shifts in their relationships with other products when treated as a single composite good. To capture these relationships, we utilize Robinson’s elasticity of substitution and cross-price elasticity, evaluating how these measures vary before and after product aggregation. Applying our method to transactional retail data, we empirically demonstrate its effectiveness in capturing subtle differences in substitutability. The proposed approach provides a practical framework for analyzing consumer perceptions and decision-making, complementing traditional tools for measuring product relationships.
Keywords
- Economic Modeling
- Decision Theory
- Decision Analysis
Status: accepted
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