differentiation_2

differentiation_2 - Product characteristics and demand...

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Product characteristics and demand Industrial Organization Hugo Hopenhayn May 8, 2008 Hugo Hopenhayn () Product characteristics and demand May 8, 2008 1 / 11
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Brand preference N consumers i = 1 , ..., N and M brands j = 1 , ..., M Consumers buy only one good or none (substitutes) U ij = U ( v i , z j , ω ij , p j ) v i individual i e/ect (how much i cares about this type of goods) z j product j e/ect (can depend on characteristics e.g. horsepower, luxury items, etc.) p j is the price of good j Empirically v i can be expressed as function of characteristics (e.g. income, demographics) z j can be expressed as function of characteristics of the good (e.g. speed, comfort, etc.) Hugo Hopenhayn () Product characteristics and demand May 8, 2008 2 ± 11
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Demand Given prices p 1 , ..., p M we calculate demand as follows: j j = ) demand for j
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differentiation_2 - Product characteristics and demand...

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