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On the Existence of Quality Measures in Random Utility Models

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  • Szczygielski, Krzysztof
  • Komisarski, Andrzej

Abstract

Random Utitly Models (RUMs) are a particularly convenient way of modelling product differentiation. In this paper we demonstrate that they can be used to examine the possibilities of creating quality measures from data on prices and sales volumes. We formulate conditions sufficient for the existence of quality measures in two broad families of RUMs: additive random utility models and pure vertical differentiation models.

Suggested Citation

  • Szczygielski, Krzysztof & Komisarski, Andrzej, 2012. "On the Existence of Quality Measures in Random Utility Models," MPRA Paper 42261, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:42261
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    File URL: https://mpra.ub.uni-muenchen.de/42261/3/MPRA_paper_42261.pdf
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    References listed on IDEAS

    as
    1. Amit Khandelwal, 2010. "The Long and Short (of) Quality Ladders," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(4), pages 1450-1476.
    2. Juan Carlos Hallak & Peter K. Schott, 2011. "Estimating Cross-Country Differences in Product Quality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(1), pages 417-474.
    3. Walker, Joan & Ben-Akiva, Moshe, 2002. "Generalized random utility model," Mathematical Social Sciences, Elsevier, vol. 43(3), pages 303-343, July.
    4. Suck, Reinhard, 2002. "Independent random utility representations," Mathematical Social Sciences, Elsevier, vol. 43(3), pages 371-389, July.
    5. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    6. Cremer, Helmuth & Thisse, Jacques-Francois, 1991. "Location Models of Horizontal Differentiation: A Special Case of Vertical Differentiation Models," Journal of Industrial Economics, Wiley Blackwell, vol. 39(4), pages 383-390, June.
    7. Marley, A. A. J., 2002. "Random utility models and their applications: recent developments," Mathematical Social Sciences, Elsevier, vol. 43(3), pages 289-302, July.
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    More about this item

    Keywords

    quality measure; product differentiation; random utility models;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General

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