cnsmr_dmnd_prod

cnsmr_dmnd_prod - Overview: Consumer Demand and...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Overview: Consumer Demand and Characteristics • Estimation of Demand for Product Characteristics – Adjusting Prices for Quality Change – Consumer valuation and discrete choice • Important Aspects of Demand – Dynamics – Network externalities Demand and Product Characteristics • Issues: – How do you sort out price effects when the quality of goods is changing over time? – How are changes in product design evaluated? • Example of the problem: PCs – IBM analysis of the demand for computers – Demand for software (e.g. spreadsheets)
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Concepts Underlying “Hedonic” Prices • For products with several quality characteristics: – View the product as a composite “bundle” of characteristics – The price of the product (the “bundle”) reflects the amount of each characteristic and the (implicit) price of each characteristic • ‘Hedonic price’ = ‘Price of characteristic’ Hedonic Price Analysis: The Basic Idea • Estimate the “prices” of the characteristics in the bundled product, using price data and multiple regression. • That is: Estimate P = f(characteristics, time) – Use regression parameters to find what characteristics are highly valued (I.e., high prices) – Use model to predict prices, compare observed price changes, and so forth • Constant product “quality” = Hold fixed the bundle of characteristics
Background image of page 2
Early Hedonic Price Analyses •W augh - - price of asparagus at Faneuil Hall in 1920’s.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/20/2011 for the course SLOAN 15.010 taught by Professor Berndt during the Fall '04 term at MIT.

Page1 / 15

cnsmr_dmnd_prod - Overview: Consumer Demand and...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online