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The consumer’s choice among television displays: A multinomial logit approach

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  • Carlos González
  • Natalia Serna

Abstract

ABSTRACT: The consumer's choice over a bundle of products depends on observable and unobservable characteristics of goods and consumers. This choice is made in order to maximize utility subject to a budget constraint. At the same time, firms make product differentiation decisions to maximize profit. Quality is a form of differentiation. An example of this occurs in the TV market, where several displays are developed. Our objective is to determine the probability for a consumer of choosing a type of display from among five kinds: standard tube, LCD, plasma, projection and LED. Using a multinomial logit approach, we find that electronic appliances like DVDs and audio systems, as well as socioeconomic status, increase the probability of choosing a high-tech television display. Our empirical approximation contributes to further understanding rational consumer behavior through the theory of utility maximization and highlights the importance of studying market structure and analyzing changes in welfare and efficiency. RESUMEN: La decisión de los consumidores sobre un conjunto de productos depende de las características observables y no observables de bienes e individuos. Esta elección se hace para maximizar la utilidad sujeta a una restricción presupuestaria, al mismo tiempo que las firmas deciden diferenciar los productos para maximizar sus beneficios. La calidad es una forma de diferenciación; esta ocurre, por ejemplo, en el mercado de televisores, donde se desarrollan diversos visualizadores. Nuestro objetivo es determinar la probabilidad de que un consumidor escoja un tipo de pantalla entre cinco opciones: televisor estándar, LCD, plasma, proyección y LED. Usando una aproximación logit multinomial, los resultados muestran que los DVDs, los sistemas de audio y el estatus socioeconómico incrementan la probabilidad de elegir un televisor con visualizador de alta tecnología. Nuestro estudio contribuye al entendimiento de la teoría de la maximización de la utilidad en consumidores racionales y resalta la importancia de analizar la estructura del mercado y cambios en el bienestar y la eficiencia.

Suggested Citation

  • Carlos González & Natalia Serna, 2013. "The consumer’s choice among television displays: A multinomial logit approach," Revista Lecturas de Economía, Universidad de Antioquia, CIE, issue 79, pages 199-228.
    • Handle: RePEc:col:000174:014751
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    References listed on IDEAS

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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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