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On the theoretical derivation of a functional form for the hedonic price function

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  • Lisi, Gaetano

Abstract

The key issue in the hedonic price theory is that although the literature emphasises the intrinsic nonlinearity in the relationship between house prices and housing characteristics, very little theoretical guidance is provided regarding the more appropriate mathematical specification for the hedonic price function. Thus, most empirical studies make use of flexible functional forms or simple linear models which possess a direct economic meaningfulness. This theoretical paper fills this gap by using the Mortensen-Pissarides matching model to show both the nonlinearity of the hedonic price function and the more appropriate functional relationship between prices and attributes.

Suggested Citation

  • Lisi, Gaetano, 2012. "On the theoretical derivation of a functional form for the hedonic price function," MPRA Paper 37066, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:37066
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    More about this item

    Keywords

    hedonic price theory; hedonic price function; search and matching process;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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