Economists develop a method to fix a 30-year bias in price elasticity research

Economists have created a new statistical technique that corrects a systematic bias in how researchers measure price sensitivity — the math that estimates whether people buy more when prices drop. The fix matters because price elasticity estimates feed directly into antitrust analysis, merger reviews, and pricing strategy for companies across industries, and the old estimates have been systematically wrong in ways that favored certain interpretations of market power.

For decades, the standard method of estimating how much demand changes when prices change has produced biased results — researchers get pulled toward certain answers by the math itself, not by what the data actually shows. This paper provides a practical correction that eliminates that bias. Applied to real supermarket scanner data on soft drink prices, the debiased estimates show prices matter about 20% more than the conventional math suggested. That shift changes how economists interpret market concentration, merger risk, and whether companies have pricing power — conclusions that matter in antitrust cases and regulatory decisions where these estimates get cited as evidence.