Step two is how big you are in the marketplace. This will also drive your elasticity. And what matters here is the magnitude of your size. Know whether you're 1% or 2% or 3% higher. Let's think through one detailed example to illustrate how that works. Imagine for one moment that you have two competitors in the marketplace. One with 80% share, and one with 20% share. Small player, large player. What happens when the smallest player lowers the price by 5%? Some customers surely will move from the large player to the smaller player. They are the people who switch. Lets imagine 5% of customers will switch. So 5% of customers switching for a 5% price delta. You could be thinking the elasticity is the ratio of the percentage of volume moving, versus the percentage of the price moving. That will be 5% divided by 5%. That will be 1. Well actually, what matters is not the volume of the market that we'll move, but as a proportion of each of the players. And let's do the math here. If you look at the 5% of the customers compared to the 80%, that's 6% of the volume of the larger players that is moving away. Now, the same 5% should be compared to the smaller player. And 5 out of 20, this is 25%. So now we need to compare that to the 5% difference in price points. So you have to do the ratio of a 6% change in volume for 5% change in price points. That's the ratio for the larger player, and that gives you a elasticity of 1.2. For the smaller player, it's 25% of the volume moving for 5% price change. And that's an elasticity of 5. What that means here is, in the same market, for very comparable products, the elasticity for the two different competitors is going to be completely different. This is amazing. This is quite surprising. Many people forget that fact. But you need to keep it in mind. Are you a really small player in the market, or are you the established player? The takeaways from this are quite simple, and they explain some of the behaviors we see in the marketplace. The larger players are the one that have lower elasticity. Therefore they tend to price higher. And they established what we call the reference wise points or the pricing umbrella. We call it the pricing umbrella because as you could see from the numbers we calculated, the incentives for most of the small player is usually to price slightly lower. Sometimes a lot lower than the larger players to gain share. Of course, that 's the beauty of the market balance. Which is if the smaller players keep gaining market share, the elasticity is going to go up, and you will get to a more balanced market, right? So that is the balance between large players and small players. But you have other circumstances where that same effect happens. For instance, in different channels. Imagine you sell through retail channel and you decide to start an online store. This online store at the beginning will have a really low volume because you're just starting it. What you will find is that the online store will have a much higher elasticity than the retail store. Which is why for most of the markets, that's one of the explanation that explains why the price points online tend to be lower than the price points offline. If we can fast forward 20 years and imagine the online channel is going to be as big as the retail channel, you will then have a balance of prices in both places. That's the equilibrium of the markets. So, that's the explanation about why elasticity depends on who you are in the marketplace. You need to remember that.