Economic valuation of product features

Greg Allenby, Jeff Brazell, John Howell and Peter Rossi ()

Quantitative Marketing and Economics (QME), 2014, vol. 12, issue 4, 456 pages

Abstract: We develop a market-based paradigm to value the enhancement or addition of features to a product. We define the market value of a product or feature enhancement as the change in the equilibrium profits that would prevail with and without the enhancement. In order to compute changes in equilibrium profits, a valid demand system must be constructed to value the feature. The demand system must be supplemented by information on competitive offerings and cost. In many situations, demand data is either not available or not informative with respect to demand for a product feature. Conjoint methods can be used to construct the demand system via a set of designed survey-based experiments. We illustrate our methods using data on the demand for digital cameras and demonstrate how the profits-based metric provides very different answers than the standard welfare or Willingness-To-Pay calculations. Copyright Springer Science+Business Media New York 2014

Keywords: Product features; Conjoint; Equilibrium profits; Bayesian analysis; C11; C23; C25; C81; D12; D43; K11; L13; M3 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (23)

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DOI: 10.1007/s11129-014-9150-x

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