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Quality Differentiation with Flavors: Demand Estimation of Unobserved Attributes

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  • Daniel Toro-Gonzalez
  • Jia Yan
  • Karina Gallardo
  • Jill McCluskey

    ()
    (School of Economic Sciences, Washington State University)

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://faculty.ses.wsu.edu/WorkingPapers/Yan/WP2012-6.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2012-6.

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Length: 32 pages
Date of creation: Aug 2012
Date of revision:
Handle: RePEc:wsu:wpaper:yan-5

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Keywords: Quality Differentiation; Unobserved Product Attributes; Demand Estimation; Gum;

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  1. Nevo, Aviv, 1998. "Measuring Market Power in the Ready-To-Eat Cereal Industry," Food Marketing Policy Center Research Reports 037, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
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  8. 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.
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Cited by:
  1. Daniel Toro-Gonzalez & Jia Yan & R. Karina Gallardo & Jill J. McCluskey, 2013. "Estimation of Unobserved Attributes Using a Control Function Approach, Modeling the Demand for Mint Flavored Gum," Working Papers 2013-06, School of Economic Sciences, Washington State University.

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