A conceptual clarification of the sources and meaning of cross-sectional price variability is used to motivate a theoretical and econometric framework for the estimation of cross-sectional demand functions. Quality effects are distinguished from supply-related price variability to identify cross-sectional demand for disaggregated food commodities. An empirical application using data from the 1977-78 Nationwide Food Consumption Survey indicates that parameter differences resulting from a failure to adjust cross-sectional prices for quality effects are likely to be small for relatively homogenous, disaggregated food commodities. In demand analysis with cross-sectional, household budget data, it is usually assumed that prices are constant (Allen and Bowley, Prais and Houthakker, George and King). Given this assumption, Engel functions are estimated where expenditure (or quantity) is regressed on income (or total expenditures), family size, and other demographic characteristics. The assumption that cross-sectional price effects are absent or are captured adequately by spatial and temporal dummy variables has not been evaluated empirically. Whether cross-sectional price effects can be treated in this manner has implications for the specification of cross-sectional demand functions as well as the estimation of Engel functions. There is a considerable literature on estimating price elasticities with cross-sectional data. Most of the applications utilize timeseries/cross-sectional data. Annual (or quarterly) household consumption surveys and

https://agecon2.tamu.edu/people/faculty/capps-oral/agec%20635/Readings/Prices%20and%20Quality%20Effects%20in%20Cross-Sectional%20Demand%20Analysis.pdf

Prices and Quality Effects in Cross-Sectional Demand Analysis

This paper attempts to summarize and integrate some recent economic theories of consumer behavior based on demand for underlying characteristics of goods. The implications of these theories for research in consumer behavior are discussed, and an attempt is made to compare and integrate these theories with recent developments in multi-attribute scaling and attitude models.

The New Economic Theory of Consumer Behavior: An Interpretive Essay

An exploration of the provision of safe food of appropriate nutritional quality, with a special emphasis on the question of how much value consumers and society place on these issues. The book develops economic models and reports the results of several valuation studies.

Valuing Food Safety And Nutrition

This paper seeks to explain the behaviour of an oligopolistic market, the United Kingdom market for cars, over the late 1950s and through the 1960s. Our primary concern is to explain market-share behaviour and thus establish the form of the demand function faced by the individual firm or by the separate divisions of such a firm. Given such information, we will be able to estimate the degree of monopoly in the industry by determining the mark-up of price over marginal costand, thereby, make some estimate of the size of the welfare loss associated with monopoly. The main obstacle to the capture of the parameters of demand functions facing specific firms is the problem of allowing for the qualitative differences among the products of different firms or divisions of firms both at a point in time and through time. Quality differences and quality changes are integrated by using a technique developed in a previous paper [3],2 The car market shows a substantial degree of product differentiation, objectively through differences in the bundles of characteristics offered in different models, and subjectively through advertising. The technique used for integrating differences in specification involves deriving implicit prices for each of the qualitative attributes, and then synthesizing the expected price for a model with a specific set of these attributes. The difference between actual and expected price is then the quality-adjusted price for the model in question. As well as explaining market-share movements for the different car manufacturers in terms of variations in price, quality and advertising, we will also, simultaneously, be concerned with the determinants of advertising appropriations. We are thus allowing for advertising to influence consumer decisions about the variety of car to be purchased, but we are also allowing for current sales to have a feedback on current managerial decisions about the level of advertising expenditure. We are assuming there is no feed-back from current sales and current advertising policy to current price and quality decisions. The prices of new cars are typically announced in October (at the Motor Show) prior to the model year and show little tendency to fluctuate during the year. Similarly, the gestation period for any substantial change in specification will typically be in excess of one year. Model changes

https://www.jstor.org/stable/info/2551879

Price, Quality and Advertising Competition: An Econometric Investigation of the United Kingdom Car Market

Several quality factors are important in valuing rough rice. This paper first evaluates the ability of federal grades to explain these factors. Second, the discounts associated with various quality factors are estimated. Finally, the factors affecting acceptance of a bid are investigated. The results indicate grades are useful but inadequate in explaining observed quality differentials. The major quality factor in determining price was head yield. Stinkbug damage was the most important quality factor of those that producers could control. The probability of acceptance increased with higher than expected bids, smaller lot sizes, more bidders, and as the marketing season progressed.

A Hedonic Price Model for Rough Rice Bid/Acceptance Markets

To understand the behavior of firms and to assess the degree of competition among firms, we need information on the demand function faced by the firm Despite this, little published work has been forthcoming on the demand for branded goods and two obvious explanations come to mind: the problem of quality variation among brands of the same commodity and the lack of data on market-share behavior This contribution is largely concerned with developing an operational version of a demand-forbrand model in which quality variation is explicitly recognized This is accomplished by following up a suggestion made by Griliches (1961) and generating implicit prices for the range of qualitative attributes a commodity possesses This allows us to construct quality-adjusted prices for each brand which are the correctly specified prices for the demand equation The model is tested out in the UK market for farm tractors and found to give satisfactory results

/pdf/price-quality-and-market-share-22odwuqbp4.pdf

Keith Cowling

Papers

Price, Quality, and Market Share