Product Characteristics—An Analysis of their Contribution to Retail Prices of Knitted Garments

Abstract

This paper is based on the theoretical structure proposed in studies by Lancaster in which it is assumed that: preferences for goods are derived from preferences for the characteristics which goods possess; the product can be described as a set of quantitative and qualitative characteristics; the price of the product may be defined as a set of implicit prices representing the consumer valuation of various characteristics. The primary objective of this paper is to examine the impact of product and shop characteristics on the value of the product as perceived by consumers and revealed by willingness to pay different prices for different characteristics. The core interest is to estimate the relationship between garment price and wool content. This is accomplished by analysis of the data of 732 knitted garments from retail shops in Melbourne, Australia. The results of the analysis indicate that both product and shop characteristics account for a considerable amount of variation in retail prices in the knitted...