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

  • Gaetano Lisi

    ()

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

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.

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Article provided by Asian Real Estate Society in its journal International Real Estate Review.

Volume (Year): 16 (2013)
Issue (Month): 2 ()
Pages: 189-207

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Handle: RePEc:ire:issued:v:16:n:02:2013:p:189-207
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