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Consumer Demand and Unobservable Product Attributes

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Abstract

Traditional approaches to consumer demand modelling ignores the problem associated with product heterogeneity where important product characteristics are latent. The point of departure in the present study is a particular framework developed in Dagsvik (1996a,b) and Dagsvik et al. (1998). In this approach the consumer is assumed to make his choice from a discrete set of product variants. The resulting model has the form of a modified conventional demand system, where the modification consists in replacing the standard price indexes by a indexes which are derived from underlying behavioral assumptions. The empirical application is based on a sample of Norwegian micro data market prices and household consumption.

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  • Leif Brubakk & John K. Dagsvik, 1998. "Consumer Demand and Unobservable Product Attributes," Discussion Papers 223, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:223
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    1. John K. Dagsvik, 1996. "Consumer Demand with Unobservable Product Attributes - Part II: Inference," Discussion Papers 167, Statistics Norway, Research Department.
    2. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132-132.
    3. John K. Dagsvik, 1996. "Consumer Demand with Unobservable Product Attributes - Part I: Theory," Discussion Papers 166, Statistics Norway, Research Department.
    4. John K. Dagsvik & Leif Brubakk, 1998. "Price Indexes for Elementary Aggregates Derived from Behavioral Assumptions," Discussion Papers 234, Statistics Norway, Research Department.
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    1. John K. Dagsvik & Leif Brubakk, 1998. "Price Indexes for Elementary Aggregates Derived from Behavioral Assumptions," Discussion Papers 234, Statistics Norway, Research Department.

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    More about this item

    Keywords

    Consumer demand; Differentiated products; Unobserved product heterogeneity;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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