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Quality bias in price elasticity

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  • Chanjin Chung

Abstract

This article examines the potential quality bias in price elasticities in cross-sectional demand analysis and develops a framework that can be used to avoid this problem. Both analytical and empirical results indicate that ignoring quality adjustment in either prices or quantities can cause biased price elasticities, which may lead to erroneous marketing decisions and policy implications.

Suggested Citation

  • Chanjin Chung, 2006. "Quality bias in price elasticity," Applied Economics Letters, Taylor & Francis Journals, vol. 13(4), pages 241-245.
    • Handle: RePEc:taf:apeclt:v:13:y:2006:i:4:p:241-245
    DOI: 10.1080/13504850500395316
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    References listed on IDEAS

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    1. Diansheng Dong & J.S. Shonkwiler & Oral Capps, 1998. "Estimation of Demand Functions Using Cross-Sectional Household Data: The Problem Revisited," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(3), pages 466-473.
    2. Julie A. Nelson, 1991. "Quality Variation and Quantity Aggregation in Consumer Demand for Food," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(4), pages 1204-1212.
    3. Thomas L. Cox & Michael K. Wohlgenant, 1986. "Prices and Quality Effects in Cross-Sectional Demand Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(4), pages 908-919.
    4. Diansheng Dong & Brian W. Gould, 2000. "Quality versus quantity in Mexican household poultry and pork purchases," Agribusiness, John Wiley & Sons, Ltd., vol. 16(3), pages 333-355.
    5. Wales, T J & Woodland, A D, 1980. "Sample Selectivity and the Estimation of Labor Supply Functions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(2), pages 437-468, June.
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    1. Vassilopoulos, Achilleas & Klonaris, Stathis & Drichoutis, Andreas C. & Lazaridis, Panagiotis, 2012. "Modeling quality demand with data from Household Budget Surveys: An application to meat and fish products in Greece," Economic Modelling, Elsevier, vol. 29(6), pages 2744-2750.
    2. Alessandro Nicita, 2008. "Price elasticities and tax reform in Mexico," Applied Economics, Taylor & Francis Journals, vol. 40(18), pages 2329-2335.
    3. Christian Elleby, 2014. "Poverty and Price Transmission," IFRO Working Paper 2015/01, University of Copenhagen, Department of Food and Resource Economics.
    4. Fleischer, Aliza & Peleg, Gil & Rivlin (Byk), Judith, 2011. "The impact of changes in household vacation expenditures on the travel and hospitality industries," Tourism Management, Elsevier, vol. 32(4), pages 815-821.

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