Measuring Material Substitution: A Logistic Approach

Considerable interest has arisen in developing analytical methods suitable for measuring resource commodity substitution patterns. some of this work has applied the Translog method to estimate actual elasticities of substitution. Recent examples incl.uae Privolos and Dunietz (1987), Kopp and Smith (1983), and Moroney and Trapani (1983). Another method, one which has received attention earlier in the work of Fisher and Pry (1970), is that of the logistic or diffusion function. We believe that the latter method has properties suitable for analyzing current problems of material substitution. The present study thus evaluates this method in its original logistic form as well as an extended version incorporating additional explanatory influences. The analysis is applied to copper/aluminum substitution and iron ore beneficiation. Substitution for copper by aluminum is examined in the building wire and cable, and magnet wire end-use markets. For iron ore, the substitution of pellets for sinter is considered for the U. S. market.