Specification, Estimation, and Empirical Corroboration of Gutenberg’s Kinked Demand Curve

After first introducing Gutenberg’s demand curve, its nature is clarified by reference to switching costs and preference distributions of buyers. Various model specifications, related approaches in the US literature and available empirical results are also presented.In our empirical study we compare specifications used hitherto, as well as piecewise linear and semi-parametric specifications of Gutenberg’s demand curve, with competing functional forms, i.e. linear, logistic, exponential.For seven out of the eleven brands studied, flexible estimation methods indicate a medium price range characterized by weak price sensitivities. On the other hand large, as well as small, price differences lead to strong responses. These results are in agreement with Gutenberg’s demand curve.