Quality differentiation with flavors: Demand estimation of unobserved attributes

Abstract

This article estimates the demand for mint-flavored gum products using grocery store sales data and accounting for consumers' valuation of quality. Unobserved product attributes, such as flavor quality, are important elements to consider when estimating the demand for gum. The estimation results suggest that gum is an inelastic product. A positive relationship between willingness to pay and unobserved quality was identified, implying that gum industry should be able to command a premium for higher quality mint-flavored products.