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Exact Hedonic Price Indexes

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  • Feenstra, Robert C

Abstract

Using the marginal value of characteristics, the author shows how to construct bounds on the exact hedonic price index. When prices are above marginal costs, then his bounds still apply but the value of characteristics cannot be measured so easily from a hedonic regression. Since the price-cost markups are an omitted variable, they will bias the coefficients obtained. For a special class of utility functions, the author argues that a linear regression will still provide a measure of the marginal value of characteristics but a log-linear regression will overstate these values. Copyright 1995 by MIT Press.

Suggested Citation

  • Feenstra, Robert C, 1995. "Exact Hedonic Price Indexes," The Review of Economics and Statistics, MIT Press, vol. 77(4), pages 634-653, November.
  • Handle: RePEc:tpr:restat:v:77:y:1995:i:4:p:634-53
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    More about this item

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation

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