Some estimates of price elasticity of demand

In the textbook on Microeconomics and Behaviour with Bob Frank we have some tables giving examples of price, income and cross-price elasticities of demand. Given that most of the references are from the 70's I'm working on an update for the forthcoming 3rd edition. So, here is a brief overview of where the numbers come from for the table on price elasticity of demand. Suggestions for other good sources much appreciated.

Before we get into the numbers - the disclaimer. Price elasticities are tricky things to tie down. Suppose you want the price elasticity of demand for cars. This elasticity is likely to be different for rich or poor people, people living in the city or the countryside, people in France or Germany etc.etc. You then have to think if you want the elasticity for buying a car or using a car (which includes petrol, insurance and so on). So, there is no such thing as the price elasticity of demand for cars. Moreover, the estimated price elasticity will depend on the actual price in the market and so there is a tricky endogeneity problem. And, that's feeds into the question of how to actually estimate elasticity from the data. Even so, it is interesting, particularly as an educational tool, to get a feel which goods are elastic and inelastic 'on average'.

Here is the list I came up with, containing a range of goods from elastic to inelastic. Overall, though, most goods seemed to come out price inelastic. For more details on where these numbers come from see below.

For food it is easy enough (at least for the US) to get some numbers thanks to a study by Andreyeva, Long and Brownell. They reviewed 160 studies to come up with the following numbers. As we might expect eating out is most price elastic.  

Anything for the EU? A study by Bouamra-Machemache and co-authors gives some evidence on dairy consumption. Fortunately, the numbers in this study match pretty well those from the US. But it is interesting to note the big range in estimates. For instance, cheese can have an elasticity of anything between 1.33 and 0.15; which seems pretty much like saying 'it could be anything'.

A nice report by Bunte and co-authors looks in detail at organic food. First they give a review of the literature and then come up with some new estimates of their own for the Dutch market. We also have the comparison with non-organic good. Overall, we can see that organic food is a lot more price-elastic than non-organic food.

Next to alcohol where there is a review of 112 studies by Wagenaar, Salois and Komro. The figure below gives average elasticities from studies using aggregate level data. It is noticeable that demand seems relatively inelastic. 

So far not a single good is price elastic. Which is not too surprising for food and drink. Let us, therefore, go to the other extreme and look at some entertainment goods. 

A study by Ghose and Han looked at demand for mobile phone apps. They find a price elasticity of demand of -3.731 for Google Play and -1.973 for the Apple App Store. So, firmly in the category of elastic demand. In terms of broadband a study by Madden and Simpson with Australian data finds a mean elasticity of -0.121. A study by Galperin and Ruzzier finds estimates of -0.36 for OECD countries compared to -2.2 for Latin American and Caribbean countries. 

For football, a study by Forest, Simmons and Feehan gets an estimate of -0.74 in the Premier League. In terms of cinema, a study by de Roos and McKenzie in Australia found an elasticity of around -2.5 while a study by Dewenter and Westermann in Germany found a similar number of -2.25. A study of Finnish opera by Laamanen got a figure of -0.69 for premieres and -3.99 for reprises. While a German study for theatre got a figure of -0.27. Even these entertainment goods seem relatively price inelastic.

Finally, let us look at transport. A study by Paulley and coauthors provides a comprehensive review of public transport with a UK focus. As we might expect demand is relatively inelastic. Note the interesting short-run versus long-run comparisons. For instance, bus journeys become elastic (just) in the long run.

For non-public transport, a study by De Jong and Gunn reviews on evidence on fuel elasticity, with a focus on the EU. These are the most inelastic numbers we have seen so far. Which is probably not good news in terms of combating climate change.

Talking of climate change, for air-travel there is a meta-study by Brons and co-authors. Overall travel is price elastic but business travel is not; no surprises there.

Finally, a study by Fleischer, Peleg and Rivlin looks at demand for vacations (by Israelis). Perhaps surprisingly you can see that demand is price inelastic.