A Hedonic Metric Approach to Estimating the Demand for Differentiated Products: An Application to Retail Milk Demand

Osman Gulseven and Michael Wohlgenant ()

No 91675, 84th Annual Conference, March 29-31, 2010, Edinburgh, Scotland from Agricultural Economics Society

Abstract: This article introduces the Hedonic Metric (HM) approach as an original method to model the demand for differentiated products. Using this approach, initially we create an n-dimensional hedonic space based on the characteristic information available to consumers. Next, we allocate products into this space and estimate the elasticities using distances. What distinguishes our model from traditional demand models such as Almost Ideal Demand System (AIDS) and Rotterdam Model is the way we link elasticities with product characteristics. Moreover, 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. We applied our model to estimate the retail demand for fluid milk products. We also compared our results with the Distance Metric (DM) approach of Rojas and Peterson (2008) using the estimation results from traditional models as a benchmark point. Our approach is shown to give superior results and better approximations to original models.

Keywords: Food; Security; and; Poverty (search for similar items in EconPapers)
Pages: 27
Date: 2010-03-29
New Economics Papers: this item is included in nep-agr, nep-ecm and nep-mkt
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https://ageconsearch.umn.edu/record/91675/files/4gulseven_wohlgeant.pdf (application/pdf)

Related works:
Working Paper: A Hedonic Metric Approach to Estimating the Demand for Differentiated Products: An Application to Retail Milk Demand (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aesc10:91675

DOI: 10.22004/ag.econ.91675

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