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On the Functional Form of the Hedonic Price Function: A Matching-theoretic Model and Empirical Evidence

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  • Gaetano Lisi

    () (Creativity and Motivations Economic Research Centre (CreaM), Department of Economics and Law, University of Cassino and Southern Lazio, Italy)

Abstract

The key issue in the hedonic price theory is that although the literature emphasises intrinsic nonlinearity in the relationship between house prices and housing characteristics, very little theoretical guidance is provided with regards to a 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 attempts to fill this gap by using the Mortensen-Pissarides matching model to show the nonlinearity of the hedonic price function and provide insights on the more appropriate functional relationship between prices and attributes.

Suggested Citation

  • Gaetano Lisi, 2013. "On the Functional Form of the Hedonic Price Function: A Matching-theoretic Model and Empirical Evidence," International Real Estate Review, Asian Real Estate Society, vol. 16(2), pages 189-207.
  • Handle: RePEc:ire:issued:v:16:n:02:2013:p:189-207
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    References listed on IDEAS

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    Cited by:

    1. Gaetano Lisi, 2013. "Matching Models and Housing Markets: the Role of the Zero-Profit Condition," Economic Research Guardian, Weissberg Publishing, vol. 3(1), pages 54-60, June.
    2. Tony Addison & Yukka Pirttilä & Finn Tarp & Carlos Felipe Balcázar & Lidia Ceriani & Sergio Olivieri & Marco Ranzani, 2017. "Rent-Imputation for Welfare Measurement: A Review of Methodologies and Empirical Findings," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(4), pages 881-898, December.
    3. Anthony Amoah & Peter G. Moffatt, 2017. "Estimating demand for reliable piped-water services in urban Ghana: An application of competing valuation approaches," University of East Anglia School of Economics Working Paper Series 2017-01, School of Economics, University of East Anglia, Norwich, UK..

    More about this item

    Keywords

    Hedonic price theory; Hedonic price function; Search and matching models;

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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