Cross-Price Elasticity Calculator
Measure the hidden impact of pricing changes. Calculate how a price change in Product A affects the sales volume of Product B (Cannibalization vs Halo Effect).
Scenario
Product A (The Driver)
Product B (The Reactor)
Price A & Volume B move in same direction.
Impact on Standard Widget Volume
Impact Analysis
Substitutes (Cannibalization)
Volume Shift
A 10% decrease in Premium Widget's price causes a 5.0% decrease in Standard Widget sales.
Revenue Impact on B
You will lose $2500.00 in revenue on Standard Widget.
Net Strategy
Compare this impact to the revenue change in Product A. Does the gain in A outweigh the loss in B? (or vice versa).
Execution Steps
Identify the two products (A and B). Product A is the one changing price.
Set the 'Price Change %' for Product A.
Set the 'Cross-Elasticity (XED)' coefficient. (Positive = Substitute, Negative = Complement).
The tool calculates the volume and revenue impact on Product B.
Pro Strategy
- If you launch a 'Lite' version, use this to estimate how many 'Pro' users will downgrade (Cannibalization risk).
- If you discount a 'Loss Leader' (Razor), use this to calculate the sales lift on the 'High Margin' complement (Blades).
- A XED of 0 means the products are independent. Pricing one does not affect the other.
Core Concepts
Substitute Goods (Positive XED)
Products that replace each other (e.g., Coke vs Pepsi). If Price A goes up, Demand B goes up. If Price A goes down, Demand B goes down (Cannibalization).
Complementary Goods (Negative XED)
Products used together (e.g., Printers and Ink). If Price A goes down, Demand B goes up (Halo Effect).
Cannibalization
When a new product or price cut steals sales from your own existing products, potentially lowering total margin.
What is Cross-Price Elasticity Calculator?
Cross-Price Elasticity of Demand (XED) measures the responsiveness of the quantity demanded for one good to a change in the price of another good. This calculator applies the XED formula to project volume shifts between related products in your portfolio.
Best For
- • Launching a cheaper 'fighter brand'.
- • Pricing accessories relative to the main hardware.
- • Estimating the impact of a competitor's price change on your sales.
Limitations
- • Assumes 'all else equal' (ceteris paribus).
- • Hard to isolate XED from own-price elasticity impacts.
- • Does not account for market expansion (new users entering).
Alternative Methods
Multi-Product Mix
Looking at the static portfolio blend rather than dynamic interaction.
Conjoint Analysis
Simulating trade-offs in a survey environment.
Industry Applications
See how this methodology generates real revenue uplift in different sectors.
SaaS Cannibalization
Introduced a $20 'Starter' plan. Feared it would kill the $50 'Pro' plan.
Modeled XED of 0.8 (Strong Substitute).
Console & Games
Selling console at loss.
Modeled negative XED (Complement) between Console Price and Game Sales.