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Abstract This paper derives and tests two hypotheses concerning characteristics of purchased consumer goods. One hypothesis states retail price paid is a weighted linear combination of a product's yields of characteristics, each weight being a marginal implicit price of a characteristic. The second hypothesis expresses consumer demand for a product as a function of income, product prices, and product's yields of characteristics. Statistical results are consistent with the hypotheses. One model used in this paper is the consumer goods counterpart to the model used by Ladd and Martin in studying prices and demands for input characteristics.
Ladd et al. (Sun,) studied this question.