| Sumario: | 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: th 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-for-brand 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 U.K. market for farm tractors and found to give satisfactory results. We have attempted an integration of the notion of price-quality relationships with a model of demand for branded goods. Recalling earlier contributions which attempt to introduce the idea of quality into theories of consumer behavior, we have developed an operational version of a model in which price and quatity are jointly allowed to determine market-share behavior. The model is tested out in the market for a durable input, farm tractors, and quality-adjusted price is found to be an important variable. Elasticities of demand facing specific manufacturers were calculated and found to be quite high--well within the elastic range in the longrun. A similar two-stage model (the first stage, requiring an estimate of the implicit prices on the qualitative brand characteristics) would seem appropriate to many markets for branded goods where quality variation among manufacturers and products is important. We are currently examining the car market, but one might examine qualitative characteristics of a less conventional sor...
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