The Dynamics of Brand Equity: A Hedonic Regression Approach to the Laser Printer Market

The authors develop a dynamic approach to measuring the evolution of comparative brand premium, an important component of brand equity. A comparative brand premium is defined as the pairwise price difference between two products being identical in every respect but brand. The model is based on hedonic regressions and grounded in economic theory. In constrast to existing approaches, the authors explicitly take into account and model the dynamics of the brand premia. By exploiting the premia’s intertemporal dependence structure, the Bayesian estimation method produces more accurate estimators of the time paths of the brand premia than other methods. In addition, the authors present a novel yet straightforward way to construct confidence bands that cover the entire time series of brand premia with high probability. The data required for estimation are readily available, cheap, and observable on the market under investigation. The authors apply the dynamic hedonic regression to a large and detailed data set about laser printers gathered on a monthly basis over a four-year period. It transpires that, in general, the estimated brand premia change only gradually from period to period. Nevertheless the method can diagnose sudden downturns of a comparative brand premium. The authors’ dynamic hedonic regression approach facilitates the practical evaluation of brand management.brand equity, price premium, hedonic regression, Bayesian estimation, dynamic linear model

The Generalized Unit Value Index

The inflation rate is normally computed as a weighted average of individual price changes. Alternatively, this rate could be evaluated by comparing average price levels. Unfortunately, this methodology has received limited attention in past research. This study attempts to remedy this situation by introducing a group of Generalized Unit Value indices that evaluate price level changes. The group includes some well-known (Laspeyres, Paasche, Banerjee), hardly known (Lehr, Davies), and previously unknown price indices. An assessment of their axiomatic properties is presented

The Measurement of Macroeconomic Price Level Changes

Textbooks of macroeconomics regularly remind their readers that they should not interpret the macroeconomic price variable as some sort of average price. Instead it represents some price index indicating the average of the individual items price changes between the period considered and some base period. The Laspeyres and the Paasche index are cited as the best known examples of this approach. The present study challenges this tradition. It develops the family of generalised unit value indices. They do not average the individual items price changes but relate the average price of the period considered to that of the base period. It is shown that a wide range of index formulas can be interpreted in this way, including the Laspeyres and the Paasche index. The study also provides an axiomatic comparison between the generalised unit value indices and several traditional price indices (e.g., Laspeyres index, Paasche index, Fisher index)

Markets with Technological Progress: Pricing, Quality and Novelty

New and old products differ in two respects: quality and newness. Whereas a higher quality of a new product always benefits consumers, the newness itself benefits some consumers, but not others, and for some, it is even a disadvantage. We capture these features in a Hotelling model of Over- Lapping Innovators (HOLI model), entailing a sequence of static Hotelling games of horizontal product differentiation (newness), that we extend by vertical product differentiation (quality). In this model the firms compete on quality and price. Using advanced dynamic hedonic regression methods, we empirically investigate the actual pricing of firms in the German laser printer market. We show that their pricing corresponds to our model with the entrant acting as the Stackelberg follower

Markets with technological progress: Pricing, quality, and novelty

New and old products differ in two respects: quality and newness. Whereas a higher quality of a new product always benefits consumers, the newness itself benefits some consumers, but not others, and for some, it is even a disadvantage. We capture these features in a Hotelling model of OverLapping Innovators (HOLI model), entailing a sequence of static Hotelling games of horizontal product differentiation (newness), that we extend by vertical product differentiation (quality). In this model, the firms compete on quality and price. Using advanced dynamic hedonic regression methods, we empirically investigate the pricing policy of firms in the German laser printer market. We show that their pricing corresponds to our model with the entrant acting as the Stackelberg follower

Anatomy of regional price differentials: Evidence from micro price data

Over the last three decades the supply of economic statistics has vastly improved. Unfortunately, statistics on regional price levels (sub-national purchasing power parities) have been exempt from this positive trend, even though they are indispensable for meaningful spatial comparisons of regional output, income, wages, productivity, standards of living, and poverty. To improve the situation, our paper demonstrates that a highly disaggregated and reliable regional price index can be compiled from data that already exist. We use the micro price data that have been collected for Germany's Consumer Price Index in May 2016. For the computation we introduce a multi-stage version of the Country- Product-Dummy method. The unique quality of our price data set allows us to depart from previous spatial price comparisons and to compare only exactly identical products. We find that the price levels of the 402 counties and cities of Germany are largely driven by the cost of housing and to a much lesser degree by the prices of goods and services. The overall price level in the most expensive region, Munich, is about 27 percent higher than in the cheapest region. Our results also reveal strong spatial autocorrelation

The Dynamics of Brand Equity: A Hedonic Regression Approach to the Laser Printer Market

The authors develop a dynamic approach to measuring the evolution of comparative brand premium, an important component of brand equity. A comparative brand premium is defined as the pairwise price difference between two products being identical in every respect but brand. The model is based on hedonic regressions and grounded in economic theory. In constrast to existing approaches, the authors explicitly take into account and model the dynamics of the brand premia. By exploiting the premias intertemporal dependence structure, the Bayesian estimation method produces more accurate estimators of the time paths of the brand premia than other methods. In addition, the authors present a novel yet straightforward way to construct confidence bands that cover the entire time series of brand premia with high probability. The data required for estimation are readily available, cheap, and observable on the market under investigation. The authors apply the dynamic hedonic regression to a large and detailed data set about laser printers gathered on a monthly basis over a four-year period. It transpires that, in general, the estimated brand premia change only gradually from period to period. Nevertheless the method can diagnose sudden downturns of a comparative brand premium. The authors dynamic hedonic regression approach facilitates the practical evaluation of brand management

Bias and Inefficiency in Quality-Adjusted Hedonic Regression Analysis

Numerous quality-adjusted hedonic price-trend studies based on computer prices have provided support to widely held suspicions that officially released price indices are not accurately measuring the price declines occurring in many information technology (IT) products. If verifiable, then general price inflation is being overestimated and, consequently, real GDP is being underestimated. Existing evidence, however, is inconclusive. First, empirical findings for IT-products other than computers are extremely rare and, secondly, estimation bias is inherent in the hedonic regression technique most commonly employed. This paper presents an unbiased method together with an estimated quality-adjusted price trend for laser printers (1993-2004)

Hedonic Price Measurement: The CCC Method

Abstract An accurate measurement of general price inflation is an essential prerequisite for sound economic analysis and prudent policy-making. Numerous hedonic regression studies (predominately focusing on computers) have suggested that due to significant product quality changes over time, driven onward by technical progress, national statistical agencies are not compiling and releasing unbiased price-trend estimates. This paper argues, however, that the estimation method commonly applied in hedonic studies is an unsatisfactory one. Therefore, an alternative estimation procedure is introduced. Utilizing this novel technique, a quality-adjusted twelve-year pricetrend for laser printers (1992 to 2003) is estimated and compared with the officially published price-trend

Classifying industries into types of relative concentration

When some industries are overrepresented in urban areas (urban concentration), some other industries must be overrepresented in rural areas (rural concentration). Existing measures of concentration do not distinguish between these different types of concentration. Instead, they rank industries according to their degree of concentration. However, knowing the concentration type is important, when investigating the forces of agglomeration that shape the geographical distribution of an industry. Therefore, the present paper proposes a new statistical approach that classifies each industry into one of seven different geographical patterns, five of which represent different types of concentration. The statistical identification of each industry's geographical pattern is based on two Goodman-Kruskal rank correlation coefficients. The power of our approach is illustrated by German employment data on 613 different industries in 412 regions