The Price Sensitivity node is designed to take a set of Products in a Market and determine the sensitivity each Product has to a change in Price by each of the other Products.
Price Sensitivity is also known as the Price Elasticity of Demand. It measures the degree to which the Quantity for a Product changes as its Price changes. Quantity general decreases as the Price of the Product become more expensive. Products that are highly sensitive to Price will have their Quantities drop sharply after a small Price increase. Products that are insensitive to Price will experience only a modest decline in Quantity after large Price increases. Cross Elasticity measures the Quantity change in the first Product due to a Price change in the second Product.
This 'Price Sensitivity' node systematically raises and lowers the Price of each individual Product. Each Target Product is taken in turn such that the Price of only one Product is changed in any given scenario. The impact of the Price change on each of the other Impacted Product's Market Share and Profitability is then measured.
The Price Sensitivity node can also handle two special scenarios: (a) the Target Price is set to be 'Free' and (b) the Target Product is set to be 'Out of Stock'.