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Exact Hedonic Price Indexes

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Author Info
Feenstra, Robert C

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Abstract

Using the marginal value of characteristics, the author shows how to construct bounds on the exact hedonic price index. When prices are above marginal costs, then his bounds still apply but the value of characteristics cannot be measured so easily from a hedonic regression. Since the price-cost markups are an omitted variable, they will bias the coefficients obtained. For a special class of utility functions, the author argues that a linear regression will still provide a measure of the marginal value of characteristics but a log-linear regression will overstate these values. Copyright 1995 by MIT Press.

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Publisher Info
Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 77 (1995)
Issue (Month): 4 (November)
Pages: 634-53
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Handle: RePEc:tpr:restat:v:77:y:1995:i:4:p:634-53

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November. [Downloadable!] (restricted)
  2. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb.. [Downloadable!] (restricted)
  3. Swan, Peter L, 1970. "Durability of Consumption Goods," American Economic Review, American Economic Association, vol. 60(5), pages 884-94, December. [Downloadable!] (restricted)
  4. Jones, Larry E, 1988. "The Characteristics Model, Hedonic Prices, and the Clientele Effect," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 551-67, June. [Downloadable!] (restricted)
  5. Pollak, Robert A, 1978. "Welfare Evaluation and the Cost-of-Living Index in the Household Production Model," American Economic Review, American Economic Association, vol. 68(3), pages 285-99, June. [Downloadable!] (restricted)
  6. Robert C. Feenstra, 1993. "Measuring the Welfare Effect of Quality Change: Theory and Application of Japanese Autos," NBER Working Papers 4401, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July. [Downloadable!] (restricted)
  8. Caplin, Andrew & Nalebuff, Barry, 1991. "Aggregation and Imperfect Competition: On the Existence of Equilibrium," Econometrica, Econometric Society, vol. 59(1), pages 25-59, January. [Downloadable!] (restricted)
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  9. Abel, Andrew B, 1983. "Market Structure and the Durability of Goods," Review of Economic Studies, Blackwell Publishing, vol. 50(4), pages 625-37, October. [Downloadable!] (restricted)
  10. Sato, Kazuo, 1976. "The Ideal Log-Change Index Number," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 223-28, May. [Downloadable!] (restricted)
  11. Pollak, Robert A., 1983. "The treatment of `quality' in the cost of living index," Journal of Public Economics, Elsevier, vol. 20(1), pages 25-53, February. [Downloadable!] (restricted)
  12. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May. [Downloadable!] (restricted)
  13. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July. [Downloadable!] (restricted)
  14. A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn. [Downloadable!] (restricted)
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