A Latent Structure Approach to Measuring Reputation

Abstract

The present study provides estimates of reputation as a dynamic latent variable that is determined by price premiums and market data. Further, it analyzes the effect of extrinsic factors on reputation. Specifically, this study seeks to (i) quantify the reputation of apples over time, (ii) study the dynamic nature of reputation, and (iii) analyze the effect of the label Washington Apple. The model adopted in this study is the dynamic multiple-indicator multiple-cause (DYMIMIC) modeling approach, which is a special case of the general latent variable modeling scheme called state-space models. Both DYMIMIC and hedonic approaches are applied to the data on apples, and results from the two approaches are compared.