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Demand Estimation In The Presence Of An Unobservable Product Attribute: The Case Of Mint Quality

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  • Toro-Gonzalez, Daniel
  • Yan, Jia
  • Gallardo, Rosa Karina
  • McCluskey, Jill J.

Abstract

This article estimates the demand for mint-flavored gum products using grocery store sales data and accounting for consumers’ valuation of quality. Unobserved product attributes, such as flavor quality, are important elements to consider when estimating the demand for gum. The estimation results suggest that gum is an inelastic product. A positive relationship between willingness to pay and unobserved quality was identified, implying that gum industry should be able to command a premium for higher quality mint flavored products.

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File URL: http://purl.umn.edu/123518
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Bibliographic Info

Paper provided by Agricultural and Applied Economics Association in its series 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington with number 123518.

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Date of creation: 2012
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Handle: RePEc:ags:aaea12:123518

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Related research

Keywords: Quality Differentiation; Unobserved Product Attributes; Demand Estimation; Gum; Consumer/Household Economics; Food Consumption/Nutrition/Food Safety; Industrial Organization;

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  1. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
  2. Florian Heiss, 2002. "Structural choice analysis with nested logit models," Stata Journal, StataCorp LP, vol. 2(3), pages 227-252, August.
  3. Michael J. Mazzeo, 2002. "Competitive Outcomes in Product-Differentiated Oligopoly," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 716-728, November.
  4. Aviv Nevo, 1998. "Measuring Market Power in the Ready-to-Eat Cereal Industry," NBER Working Papers 6387, National Bureau of Economic Research, Inc.
  5. Cameron,A. Colin & Trivedi,Pravin K., 2005. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9780521848053.
  6. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  7. Bontemps, Christophe & Orozco, Valérie & Réquillart, Vincent, 2008. "Private Labels, National Brands and Food Prices," IDEI Working Papers 402, Institut d'Économie Industrielle (IDEI), Toulouse.
  8. Ronald Cotterill & William Putsis, 2000. "Market Share and Price Setting Behavior for Private Labels and National Brands," Review of Industrial Organization, Springer, vol. 17(1), pages 17-39, August.
  9. Draganska, Michaela & Seim, Katja & Mazzeo, Michael, 2007. "Beyond Plain Vanilla: Modeling Joint Product Assortment and Pricing Decisions," Research Papers 1982, Stanford University, Graduate School of Business.
  10. Victor Tremblay & Stephen Polasky, 2002. "Advertising with Subjective Horizontal and Vertical Product Differentiation," Review of Industrial Organization, Springer, vol. 20(3), pages 253-265, May.
  11. William Allender & Timothy Richards, 2010. "Market Diversion and Market Power: California Eggs," Review of Industrial Organization, Springer, vol. 36(1), pages 37-58, February.
  12. Cotterill, Ronald W. & Putsis, William P., Jr. & Dhar, Ravi, 2000. "Market Share and Price Setting Behavior For Private Labels and National Brands," Research Reports 25209, University of Connecticut, Food Marketing Policy Center.
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