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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
- Berndt, Ernst R & Savin, N Eugene, 1975. "Estimation and Hypothesis Testing in Singular Equation Systems with Autoregressive Disturbances," Econometrica, Econometric Society, vol. 43(5-6), pages 937-57, Sept.-Nov.
- Bartik, Timothy J, 1987. "The Estimation of Demand Parameters in Hedonic Price Models," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 81-88, February.
- Deaton, Angus, 1987. "Estimation of own- and cross-price elasticities from household survey data," Journal of Econometrics, Elsevier, vol. 36(1-2), pages 7-30.
- Deaton, Angus, 1986. "Demand analysis," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 30, pages 1767-1839 Elsevier.
- Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
- Deaton, A., 1988.
"Quality, Quantity, And Spatial Variation Of Price,"
30, World Bank - Living Standards Measurement.
- Dagsvik, John K, 1994. "Discrete and Continuous Choice, Max-Stable Processes, and Independence from Irrelevant Attributes," Econometrica, Econometric Society, vol. 62(5), pages 1179-1205, September.
- Epple, Dennis, 1987. "Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 59-80, February.
- Lluch, Constantino, 1973. "The extended linear expenditure system," European Economic Review, Elsevier, vol. 4(1), pages 21-32, April.
- John K. Dagsvik & Leif Brubakk, 1998. "Price Indexes for Elementary Aggregates Derived from Behavioral Assumptions," Discussion Papers 234, Research Department of Statistics Norway.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (J Bruusgaard).
If references are entirely missing, you can add them using this form.