The demand and supply of quality: a case study of televisions

We estimate the demand and the supply of quality in 13 European countries utilizing data on exports and imports of various types of television sets. Large-screen TVs have a higher unit value, on average,but there is a large dispersion of unit values across source countries and destinations. Richer countries tend to export large-screen TVs at a lower price relative to small-screen TVs, potentially because they have a comparative advantage in producing in quality. We also find that there is a downward sloping demand for quality, with countries facing a larger quality premium buying fewer large-screen TVs. This suggests that there is no simple quality-quantity trade (unlike in many recent trade models), and the demand for quality should be modeled separately.