# Node Description

# Elasticity Similarity Node

The Elasticity Similarity node generates a ‘Product Similarity Rankings’ table by calculating the degree of Cross-Elasticity between Products using historic sales data from one or more Markets. The Product Similarity Rankings table can then be used by downstream nodes to generate a Product Correlation Matrix. For example, the Similarity Matrix node could be placed directly downstream of this Elasticity Similarity node. Ultimately this Product Correlation Matrix would be used to generate a WTP Matrix containing the Willingness To Pay (WTP) of each Customer for each Product in a Market.

The node tests whether a relative Price Change between Products is causing Customers to switch their Purchase behavior and by how much. For example, if the Price of Product_01 increases then more Customers might switch to Product_02 than to Product_03. This would be the case if Product_01 was more similar to Product_02 than to Product_03. Economists in this case would describe Product_02 as being a better substitute for Product_01.

Once all of the Product-to-Product Similarity values have been calculated it becomes possible to Rank each Product relative to each of the others. A Ranking of #1 indicates that the ‘Then Product’ is the closest substitute to the ‘If Product’, while a Ranking of #100 indicates that Price of the ‘If Product’ has almost no impact on the sales of the ‘Then Product’. Either the output ‘Ranking’ column or the output ‘Similarity’ column (default) is used by a downstream node to calculate the Product Correlation Matrix.

*This Premium Node is not available as part of the free Community Edition. Premium Nodes help clean and connect real-world data to Market Simulations, and provide advanced Market Science analysis. Note that these descriptions are often deliberately vague.*

# Downloads

# Elasticity Similarity

The Elasticity Similarity node generates a ‘Product Similarity Rankings’ table by calculating the degree of Cross-Elasticity between Products using historic sales data from one or more Markets. The Output Product Similarity Rankings table can then be used to generate a WTP Matrix containing the Willingness To Pay (WTP) of each Customer for each Product in a Market.

## Inputs

#### Input Market Array

Contains the historic sales data for one or more Markets at one or more Timestamps.

#### Product Attributes

Optional detail concerning each Product found within the ‘Input Market Array’. Products found in the ‘Input Product Attributes’ will be included in the ‘Output Product Similarity Rankings’ with imputed Similarities even if they were not included in the ‘Input Market Array’.

## Node

#### Configuration

The user can generate the ‘Output Regression Source Data’ table containing all the data used by each Regression in the Elasticity Similarity Algorithm when calculating the Similarity Ranking between each ‘If Product’ and ‘Then Product’.

## Outputs

#### Output Product Array

The Output Product Similarity Rankings lists the Price-Elasticity and Cross-Elasticity relationships between all Products found in the historic data.

#### Output Regression Source Data

The data comparing the relative changes between the [If Product:Then Product] within each Market and between each Timestamp. This source data is used by each Regression run by the Elasticity Similarity Algorithm.