Business forecasting method may be useful to estimate the value of product: forecasting of total production cost, demand-value and supply-value the variables to be administered.

You may start by looking at the Hedonic price model, see Rosen (1974).

Rosen, S. 1974. Hedonic prices and implicit markets: product differentiation in perfect competition. Journal of Political Economy, 82, 34-55.

Do you think the variables that determine the value of products should be multiplicative or additive? 

Also how about the value of ideas instead of products? Do you think the same method applies for determining the value of an ideas as well?

The valuation of a product depends on its nature: private or not. The value of a private product is its price in general. Non private products are evaluated using many methods such as contigent valuation method, hedonic pricing method, travel cost method, health expenditures, etc.

Ugur,

There are many methods available to value products.  Some examples have already been listed although those listed are not the only methods.  Your choice will ultimately depend upon (1) the type of product you are valuing, (2) the purpose of your study, and (3) the type of data available to you.

Using price as a proxy for value is only accurate if the current price reflects current value.  In many instances, this is not the case (and in may cases, as in your "idea" example, there is no market price for your product of interest).  Some areas you may want to investigate  are (1) hedonic pricing, (2) shadow pricing, (3) willingness-to-pay and be sure you have a good understanding of (4) opportunity cost.

There are several revealed preference and stated preference methods for valuing "products" that don't have a market value.  You may want to check into these and see if any fit your study.

Hope this helps!

Tina

'Price/value of product= Full-Cost+ margin of profit/ total out-put' is the most practising method or model.

thanks a lot for all the insigthfull comments

Ugur,

Be sure to keep in mind that the "value" of a product is not necessarily equal to nor is it a function of price.  Economic value of a product has to do with its utility to individuals and in aggregate its benefit to society.  It is thus equal to society's willingness-to-pay (or what they are willing to give up--their opportunity cost) for that product.  This is different from it's market price.

Best,

Tina

Product value is simply the multiplication of output in quantity and unit price.  When unit price is not available, one can go for some imputed values, or can take some market prices to proxy.  When one wants to use product value in some or the other part of analysis, not just to read behaviour, one should use it at some base year values to avoid inflation effects.  Utilitarian approach would fail in some cases since utils differ with individuals and using some constant measures would bias results obtained.

You have it back to front. For commercial products the value is what people are willing to pay. Anyone who works on a cost plus basis is likely to go bankrupt very quickly. As Tina says the market for public goods is imperfect, so social value and price do not coincide. But still nothing to do with cost of production. Since we are not working in fairyland, we work on the basis of price, not on an extremely complex, and disputed, perception of value. Why cite Rosen, when Waugh 1926 did it much better?

You have to take into account the cost of inputs, labor (except family labor), etc. add a risk factor and your desired profit, you add all those and you compare it to the market price of that good, if your cost (privet) is lower you are competitive if not... you buy in the market  

Do you think an increase in the quality of a characteristic of a product multiplies its value or makes an additive contribution only?

In most cases quality adds little to its value, but each case is different depending on the impact it causes in the consumer. Better quality of brakes in a car can improve its demand but not its price, unless there is no substitutes 

Again, the question is back to front. 'increase in the quality of a characteristic' is a very confused wording (See Bowbrick on quality grades and brands for instance.) Changing the level (not quality) of an objective characteristic may have no effect on the quality of the end product, as Rafaes Trueta Santiago shows. Increasing the level of one objective characteristic, sugar in tea for example, without changing others, may first increase the quality of the tea, then reduce it, as the tea becomes too sweet to drink. Again, see Bowbrick for many variations in this. The economics of quality is the most difficult area in economics, as it includes all marketing economics, then requires different dimensions for each objective characteristic, then for each subjective attribute. At this stage, I suggest the researcher sticks to the question, 'What is the consumer willing to pay for the product?'

I second Peter's suggestion.  Stick with willingness-to-pay and you will accurately (from an economic theory perspecitve) estimate value.

In addition to my previous comments, you can estimate the value of goods by the yearly output of its use multiplied by a reasonable time period. I hope this expands the scope of answer

so  do you think the idea that the value of a product equals to its market price is correct according to the willingness-to-pay?

It is appropriate to assume at least three point of views and - at the same time - three addition questions to be raised. It depends, however, to whom it particularly concern.

1) is he or she a producer?

2) is he or she a consumer or rather buyer?

or

3) is he or she an expert who is interested, for any reason, to determine the right (appropriate or acceptable) price?

In order to answer the first question, a comparison between benefit (price) and requirements (expenses) will be of help. Nowadays, there are many "adhesive" labels of - from producer point of view - what "value" really is. See the link below for further hints and explanations.  

The answer to the second question is a bit more complicated, since we should account for the concept of opportunity cost.  If a good is considered to represent a value worth buyers effort, then the required "effort" will be taken. Sometimes does the effort mean work or an exchange for another good (considered to represent not more then the estimated value of the desired good). Sometimes is this effort an amount of money. Is the buyer satisfied with the price he or she paid, can the exchange be labeled as valuable. In this matter I also second Tina's and Peter's suggestions.

The answer to the third question is quite ease. An expert uses a very comprehensive tool called "pairwise comparison". 

I hope, this was not awfully boring ;-)

Best regards

http://www.inzeko.ktu.lt/index.php/Ekv/article/view/5722/3279

In addition to point discussed above, I would like to suggest a method/model for estimating the value of a product = Total Cost + Total Profit Expected/ Total Ouput. the expectation of profit depends on its comparative advantage and nature of demand for the product to be produce.