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Hedonic prices, goods-specific effects and functional form: inferences from cross-section time series data

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  • Mark Dickie
  • Charles Delorme
  • Jeffrey Humphreys

Abstract

Tests for two key elements of the hedonic model of price determination for differentiated goods are proposed when cross-sectional, time series data are available. First, the hedonic hypothesis, that price is determined by sellers' and buyers' valuations of characteristics bundled in a good, is tested against the alternative that consumers demand specific goods. The sensitivity of the outcome of the test to unmeasured characteristics, serial correlation or heteroscedasticity, and misspecification of functional form is assessed. Second, a novel approach to testing functional form illustrates limitations of testing hedonic specifications only against alternatives nested in the Box-Cox functional form.

Suggested Citation

  • Mark Dickie & Charles Delorme & Jeffrey Humphreys, 1997. "Hedonic prices, goods-specific effects and functional form: inferences from cross-section time series data," Applied Economics, Taylor & Francis Journals, vol. 29(2), pages 239-249.
  • Handle: RePEc:taf:applec:v:29:y:1997:i:2:p:239-249
    DOI: 10.1080/000368497327308
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    References listed on IDEAS

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    7. Cropper, Maureen L & Deck, Leland B & McConnell, Kenneth E, 1988. "On the Choice of Functional Form for Hedonic Price Functions," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 668-675, November.
    8. James Heckman & Jose Scheinkman, 1987. "The Importance of Bundling in a Gorman-Lancaster Model of Earnings," Review of Economic Studies, Oxford University Press, vol. 54(2), pages 243-255.
    9. Peter S. Burton, 1994. "Support for a Characteristics Approach: Evidence from the Market for Insecticides," Canadian Journal of Economics, Canadian Economics Association, vol. 27(1), pages 1-19, February.
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    11. Atkinson, Scott E & Halvorsen, Robert, 1984. "A New Hedonic Technique for Estimating Attribute Demand: An Application to the Demand for Automobile Fuel Efficiency," The Review of Economics and Statistics, MIT Press, vol. 66(3), pages 417-426, August.
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    Cited by:

    1. Brachinger, Hans Wolfgang & Beer, Michael, 2009. "The Econometric Foundations of Hedonic Elementary Price Indices," DQE Working Papers 12, Department of Quantitative Economics, University of Freiburg/Fribourg Switzerland.
    2. repec:spr:alstar:v:102:y:2018:i:1:d:10.1007_s10182-017-0293-4 is not listed on IDEAS
    3. Gabriel Leite Mota, 2007. "Why Should Happiness Have a Role in Welfare Economics? Happiness versus Orthodoxy and Capabilities," FEP Working Papers 253, Universidade do Porto, Faculdade de Economia do Porto.

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