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The Dynamics of Brand Equity: A Hedonic Regression Approach to the Laser Printer Market

  • Ludwig von Auer
  • Mark Trede

The authors develop a dynamic approach to measuring the evolution of comparative brand premium, an important component of brand equity. A comparative brand premium is defined as the pairwise price difference between two products being identical in every respect but brand. The model is based on hedonic regressions and grounded in economic theory. In constrast to existing approaches, the authors explicitly take into account and model the dynamics of the brand premia. By exploiting the premia’s intertemporal dependence structure, the Bayesian estimation method produces more accurate estimators of the time paths of the brand premia than other methods. In addition, the authors present a novel yet straightforward way to construct confidence bands that cover the entire time series of brand premia with high probability. The data required for estimation are readily available, cheap, and observable on the market under investigation. The authors apply the dynamic hedonic regression to a large and detailed data set about laser printers gathered on a monthly basis over a four-year period. It transpires that, in general, the estimated brand premia change only gradually from period to period. Nevertheless the method can diagnose sudden downturns of a comparative brand premium. The authors’ dynamic hedonic regression approach facilitates the practical evaluation of brand management.

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Paper provided by University of Trier, Department of Economics in its series Research Papers in Economics with number 2010-03.

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Length: 30 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:trr:wpaper:201003
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  1. Ernst R. Berndt & Neal J. Rappaport, 2001. "Price and Quality of Desktop and Mobile Personal Computers: A Quarter-Century Historical Overview," American Economic Review, American Economic Association, vol. 91(2), pages 268-273, May.
  2. Parcell, Joseph L. & Schroeder, Ted C., 2007. "Hedonic Retail Beef and Pork Product Prices," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 39(01), April.
  3. Avi Goldfarb & Qiang Lu & Sridhar Moorthy, 2007. "Measuring Brand Value in an Equilibrium Framework," Food Marketing Policy Center Research Reports 099, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  4. Hjorth-Andersen, Chr, 1984. " The Concept of Quality and the Efficiency of Markets for Consumer Products," Journal of Consumer Research, University of Chicago Press, vol. 11(2), pages 708-18, September.
  5. Ludwig Auer, 2007. "Hedonic price measurement: the CCC approach," Empirical Economics, Springer, vol. 33(2), pages 289-311, September.
  6. Ludwig Von Auer & John Brennan, 2007. "Bias and inefficiency in quality-adjusted hedonic regression analysis," Applied Economics, Taylor & Francis Journals, vol. 39(1), pages 95-107.
  7. Nelson, Randy A & Tanguay, Tim L & Patterson, Christopher D, 1994. "A Quality-Adjusted Price Index for Personal Computers," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(1), pages 23-31, January.
  8. Chib, Siddhartha, 1993. "Bayes regression with autoregressive errors : A Gibbs sampling approach," Journal of Econometrics, Elsevier, vol. 58(3), pages 275-294, August.
  9. Venkatesh Shankar & Pablo Azar & Matthew Fuller, 2008. "—: A Multicategory Brand Equity Model and Its Application at Allstate," Marketing Science, INFORMS, vol. 27(4), pages 567-584, 07-08.
  10. Chib, Siddhartha & Greenberg, Edward, 1995. "Hierarchical analysis of SUR models with extensions to correlated serial errors and time-varying parameter models," Journal of Econometrics, Elsevier, vol. 68(2), pages 339-360, August.
  11. Srinivasan, V. "Seenu" & Park, Chan Su & Chang, Dae Ryun, 2005. "An Approach to the Measurement, Analysis, and Prediction of Brand Equity and Its Sources," Research Papers 1685r2, Stanford University, Graduate School of Business.
  12. V. Srinivasan & Chan Su Park & Dae Ryun Chang, 2005. "An Approach to the Measurement, Analysis, and Prediction of Brand Equity and Its Sources," Management Science, INFORMS, vol. 51(9), pages 1433-1448, September.
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