A Framework for Empirical Modelling of Consumer Demand with Latent Quality Attributes
AbstractThis paper discusses a particular approach to empirical consumer demand modelling when products are differentiated and the product attributes are unobservable. In contrast to the traditional approach to this problem, see e.g. Epple (1987) and Deaton (1987, 1988), where the product variants are treated as infinitely divisible goods, the present approach assumes that the consumer is making his choice of variant from a set of discrete "packages" of attribute combinations. Subsequently, given the (discrete) choice of variants the corresponding quantities are treated as continuous choices. Thus in this approach the consumer's decision process is formulated as a discrete/continuous choice problem. The empirical analysis is based on microdata from the Sichuan province in China. We show that in this case the estimation methods work well and yield reasonable results.
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Bibliographic InfoPaper provided by Research Department of Statistics Norway in its series Discussion Papers with number 229.
Date of creation: Sep 1998
Date of revision:
Consumer demand; Differentiated products; Latent product attributes;
Find related papers by 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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