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Hedonic methods for baskets of goods

  • Griffith, Rachel
  • Nesheim, Lars

Existing hedonic methods cannot be easily adapted to estimate willingness to pay for product characteristics when willingness to pay depends on a very large basket of goods. We show how to marry these methods with revealed preference arguments to estimate bounds on willingness to pay using data on purchases of seemingly impossibly high dimensional baskets of goods. This allows us to use observed purchase prices and quantities on a large basket of products to learn about individual household’s willingness to pay for characteristics, while maintaining a high degree of flexibility and also avoiding the biases that arise from inappropriate aggregation.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165176513002188
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 120 (2013)
Issue (Month): 2 ()
Pages: 284-287

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Handle: RePEc:eee:ecolet:v:120:y:2013:i:2:p:284-287
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Pollak, Robert A., 1989. "The Theory of the Cost-of-Living Index," OUP Catalogue, Oxford University Press, number 9780195058703, March.
  2. Yoshitsugu Kanemoto, 1985. "Hedonic Prices and the Benefits of Public Projects," Working Papers 617, Queen's University, Department of Economics.
  3. Laura Blow & Martin Browning & Ian Crawford, 2008. "Revealed Preference Analysis of Characteristics Models," Review of Economic Studies, Oxford University Press, vol. 75(2), pages 371-389.
  4. Rachel Griffith & Martin O'Connell, 2009. "The Use of Scanner Data for Research into Nutrition," Fiscal Studies, Institute for Fiscal Studies, vol. 30(Special I), pages 339-365, December.
  5. Ariel Pakes, 2003. "A Reconsideration of Hedonic Price Indexes with an Application to PC's," American Economic Review, American Economic Association, vol. 93(5), pages 1578-1596, December.
  6. C. Lanier Benkard & Patrick Bajari, 2005. "Hedonic Price Indexes With Unobserved Product Characteristics, and Application to Personal Computers," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 61-75, January.
  7. Scotchmer, Suzanne, 1985. "Hedonic prices and cost/benefit analysis," Journal of Economic Theory, Elsevier, vol. 37(1), pages 55-75, October.
  8. Andrew Leicester & Zo� Oldfield, 2009. "Using Scanner Technology to Collect Expenditure Data," Fiscal Studies, Institute for Fiscal Studies, vol. 30(Special I), pages 309-337, December.
  9. Rachel Griffith & Lars Nesheim, 2010. "Estimating households' willingness to pay," CeMMAP working papers CWP24/10, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
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