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TID. RD/N. Conceptual Structure of Demand Model. Firm Demand = Total Industry Demand * Market Share Define Market Share = Firm Demand / Total Industry Demand Market Share = Firm Demand / (Avg. Demand * Number of Firms) Market Share = Relative Demand / Number of Firms

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conceptual structure of demand model

TID

RD/N

Conceptual Structure of Demand Model

Firm Demand = Total Industry Demand * MarketShare

Define Market Share = Firm Demand / Total Industry Demand

Market Share = Firm Demand / (Avg. Demand * Number of Firms)

Market Share = Relative Demand / Number of Firms

Firm Demand = Total Industry Demand * (Relative Demand / N)

Macro-economic Influences

Seasonal Patterns

Stage of Life Cycle

Exogenous

Demand

Industry Activity

Pricing, Promotion,

Quality

Endogenous

Demand

FD

Competitive Profile

Relative Pricing, Promotion,

Quality, and Loyalty

Relative

Demand

total industry demand

TID

Exogenous Demand

Endogenous Demand

Macro-Economic

Influences

- Seasonality

- Stage of Life Cycle

Estimate Trend and

Seasonality using

Time Series Analysis

Industry Behavior

- Pricing (Avg Price)

- Promotion (Avg. Advertising)

- Product Quality (Avg. R&D)

Estimate weights of these factors using Regression Analysis

Total Industry Demand
relative demand measure of market share

Pricing

Relative Price (PREL)

RD

Promotion

Loyalty

Relative Advertising

RD1 (t-1)

Quality

Relative R&D

Relative Demand(Measure of Market Share)

RD is firm specific and a measure of market share, the predictor variables should also be relative to industry averages.

For example, relative price of the firm is PREL = Firm’s Price / Industry Avg. Price

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