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Suppose you worked for the Ford Motor
Company and had to help plan new models;
to introduce. Should the new models empha*
i size Interior space or handling? Horsepower
or gas mileage? To decide, you would want to
know how people value the various attrifc*
utes of a car, such as power, size, handling^
gas mileage,, interior features, and so on. The?;’
more desirable the attributes, the more peo
ple would be willing to pay for a car. However, the better the attributes, the more
the car will cost to manufacture- Л car with a more powerful engine and толе
interior space, for example, wall cost more to produce than a car with a similes
engine and less space. How should Ford trade oil these different attributes and
decide which ones to emphasize?
The answer depends in part on the cost of production, but it also depends
щ
consumer preferences. To find out how much people are willing to pay for various*
attributes, economists and marketing experts look at the prices that people actu
ally do pay for a wide range of models with a range of attributes- For example. $
the only difference between two cars is interior space, and it the car with 2 addi
tional cubic feet sells for SI GOG more than its smaller counterpart, then interior
space will be valued at 5500 per cubic fo o t By evaluating car purchases over a
range ot buyers and a range of models, one can estimate the values associated
with various attributes, while accounting for the fact that these valuations ma$
dimmish as more and m ore of each attribute is included in a car. One w ay tcL
obtain
such information is by conducting surveys in which individuals are asked,
about their preferences for various automobiles with different combinations of
attributes. Another way is to statistically analyze past consumer purchases of cais
whose attributes varied
One recent statistical study looked at a wide range of Ford models with vary- ‘
mg attributes.3 Figure 3.7 describes two sets of indifference curves, derived I rout
an analysis that varies tw o attributes:
interior size
(measured in cubic feet) ап&
acceleration
(measured m horsepower)
(or typical consumers of Ford аШотоЫШ*
Figure 3 7(a) describes the preferences of typical ow ners of Ford Mustang
'Ami! Petrm. ' Quantifying the Benefits ot N«w Products; Th«? Case of She MiMvan,”
fssuгя&1Щ
P dstkai
2002, vol. 110, pp. ?U$-729. We wish to thd«k Amd t’etrin for providing some of '«■.
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