TY - JOUR
T1 - A quality-based approach to estimating quantitative elasticities for differentiated products
T2 - an application to retail milk demand
AU - Gulseven, Osman
AU - Wohlgenant, Michael
N1 - Publisher Copyright:
© 2014, Springer Science+Business Media Dordrecht.
PY - 2015/9/18
Y1 - 2015/9/18
N2 - This article introduces the Hedonic Metric (HM) approach as an original method to model the demand for differentiated products using qualitative attributes. Our approach is based on a two-stage estimation procedure that utilizes qualitative characteristics of products. First, we create an n-dimensional hedonic space based on the qualitative information available to consumers. Next, we allocate the differentiated products into this space and estimate the quantitative demand elasticities for these products using qualitative factor distances. What distinguishes our model from traditional demand estimation models is the way we link elasticities with products’ qualitative attributes. Moreover, in traditional demand systems, the number of estimated parameters increases exponentially with the number of variables included in the model. Our model significantly reduces the number of parameters to be estimated, thereby making it possible to estimate large number of differentiated products in a single demand system.
AB - This article introduces the Hedonic Metric (HM) approach as an original method to model the demand for differentiated products using qualitative attributes. Our approach is based on a two-stage estimation procedure that utilizes qualitative characteristics of products. First, we create an n-dimensional hedonic space based on the qualitative information available to consumers. Next, we allocate the differentiated products into this space and estimate the quantitative demand elasticities for these products using qualitative factor distances. What distinguishes our model from traditional demand estimation models is the way we link elasticities with products’ qualitative attributes. Moreover, in traditional demand systems, the number of estimated parameters increases exponentially with the number of variables included in the model. Our model significantly reduces the number of parameters to be estimated, thereby making it possible to estimate large number of differentiated products in a single demand system.
KW - Differentiated products
KW - Distance metrics
KW - Hedonic metrics
KW - Milk demand
KW - Qualitative analysis
KW - Rotterdam model
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U2 - 10.1007/s11135-014-0094-8
DO - 10.1007/s11135-014-0094-8
M3 - Article
AN - SCOPUS:84939159074
SN - 0033-5177
VL - 49
SP - 2077
EP - 2096
JO - Quality and Quantity
JF - Quality and Quantity
IS - 5
ER -