An index approach to measuring product differentiation : a hedonic analysis of airfares
Grifell-Tatjé, Emili (Universitat Autònoma de Barcelona. Departament d'Empresa)
Howell, Charles Baird (Universitat Autònoma de Barcelona. Departament d'Empresa)

Publicación:	Wiley-Blackwell, 2022
Resumen:	The main objective of this paper is to introduce an Allen-type index of differentiation based on cost functions. With this index, we create an economic measure of product differentiation that quantifies differences between products. Applied research has some generally accepted economic measures, for example, the Herfindahl-Hirschman Index for market concentration, or the Gini coefficient for inequality. Product differentiation, however, does not yet have an established measure. Our objective is to fill that gap and introduce a measure that can be used in market-related applied research such as market power, antitrust, price indexes, or market strategy. To operationalize the index, we introduce the concept of a core product and use cost functions to measure the degree of differentiation from the core product. To demonstrate the use of the index, we study the effect of product differentiation on price formation in the airline industry using an enhanced hedonic model. The model is empirically tested on 103,980 observations of quarterly US domestic airfare data between 2002 and 2016 and shows that product differentiation has a significant effect on both price and mark-up.
Ayudas:	Ministerio de Economía, Industria y Competitividad PID2020-114460GB-C31
Derechos:	Aquest document està subjecte a una llicència d'ús Creative Commons. Es permet la reproducció total o parcial, la distribució, i la comunicació pública de l'obra, sempre que no sigui amb finalitats comercials, i sempre que es reconegui l'autoria de l'obra original. No es permet la creació d'obres derivades.
Lengua:	Anglès
Documento:	Article ; recerca ; Versió publicada
Materia:	Airline industry ; Core product ; Firm heterogeneity ; Hedonic function ; Pricing ; Product differentiation index
Publicado en:	Review of Income and Wealth, August 2022, ISSN 1475-4991

DOI: 10.1111/roiw.12612

23 p, 401.8 KB

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