The price discount effects in the Italian pasta market

The purpose of this paper was to investigate the effect of price competitiveness strategy in the Italian pasta market and its results for some of the most important brands. For that purpose, after defining the market concentration, we estimated the equation of the empirical elasticity to understand how the price discounts of the major brands analysed have an impact on their own sales and those of their competitors. This is a research paper that, from the starting point of empirical elasticity, shows how it is composed of two components: the direct and the indirect elasticity. In fact, the variation of the quantity purchased of an item may not be, at least in principle, attributed solely to changes in the price of the same good. To understand this variation better, it is necessary to take into consideration the indirect elasticity too. The analysis has shown that in the Italian pasta market, price competition is not always a good strategy to improve sales. From the results, a second effect also appears that we have defined as income effect. From this paper there is clear evidence of the income effect, therefore price reduction in that market is not working properly to increase the market share. We estimated both the direct and the indirect elasticity.