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Quality Differentiation with Flavors: Demand Estimation of Unobserved Attributes

Author

Listed:
  • Daniel Toro-Gonzalez
  • Jia Yan
  • Karina Gallardo
  • Jill McCluskey

    (School of Economic Sciences, Washington State University)

Abstract

This article estimates the demand for mint-flavored gum products using grocery store sales data and accounting for consumers’ valuation of quality. Unobserved product attributes, such as flavor quality, are important elements to consider when estimating the demand for gum. The estimation results suggest that gum is an inelastic product. A positive relationship between willingness to pay and unobserved quality was identified, implying that gum industry should be able to command a premium for higher quality mint flavored products.

Suggested Citation

  • Daniel Toro-Gonzalez & Jia Yan & Karina Gallardo & Jill McCluskey, 2012. "Quality Differentiation with Flavors: Demand Estimation of Unobserved Attributes," Working Papers 2012-6, School of Economic Sciences, Washington State University.
    • Handle: RePEc:wsu:wpaper:yan-5
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    File URL: http://faculty.ses.wsu.edu/WorkingPapers/Yan/WP2012-6.pdf
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    References listed on IDEAS

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    Cited by:

    1. Daniel Toro-Gonzalez & Jia Yan & R. Karina Gallardo & Jill J. McCluskey, 2013. "Estimation of Unobserved Attributes Using a Control Function Approach, Modeling the Demand for Mint Flavored Gum," Working Papers 2013-06, School of Economic Sciences, Washington State University.
    2. Torshizi Mohammad & Fulton Murray E. & Gray Richard S., 2018. "Non-Linear Demand in a Linear Town," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 16(2), pages 1-12, November.
    3. Zhang, Qi & Gallardo, R. Karina, 2018. "Willingness and Purchase Decision on Refrigerated Ready-to-eat Meals," 2018 Annual Meeting, August 5-7, Washington, D.C. 273992, Agricultural and Applied Economics Association.
    4. Toro Gonzalez, Daniel, 2014. "Demand Model Simulation in R with Endogenous Prices and Unobservable Quality," MPRA Paper 59117, University Library of Munich, Germany.

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    More about this item

    Keywords

    Quality Differentiation; Unobserved Product Attributes; Demand Estimation; Gum;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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