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Hedonic price functions

Author

Listed:
  • Lars Nesheim

    (Institute for Fiscal Studies and University College London)

Abstract

A hedonic price function describes the equilibrium relationship between characteristics of a product and its price. They are used to predict prices of new goods, to adjust for quality change in price indexes, and to measure consumer and producer valuations of differentiated products. They emerge as market outcomes from both competitive and non-competitive markets. The functional form is determined by the distribution of buyers and their preferences, the distribution of sellers and their costs, and the structure of competition in the market.

Suggested Citation

  • Lars Nesheim, 2006. "Hedonic price functions," CeMMAP working papers CWP18/06, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:cemmap:18/06
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    File URL: http://cemmap.ifs.org.uk/wps/cwp1806.pdf
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    References listed on IDEAS

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    1. Ivar Ekeland & James J. Heckman & Lars Nesheim, 2004. "Identification and Estimation of Hedonic Models," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 60-109, February.
    2. Fujita,Masahisa, 1991. "Urban Economic Theory," Cambridge Books, Cambridge University Press, number 9780521396455, September.
    3. Pollak, Robert A., 1983. "The treatment of `quality' in the cost of living index," Journal of Public Economics, Elsevier, vol. 20(1), pages 25-53, February.
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    6. 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.
    7. Patrick Bajari & C. Lanier Benkard, 2005. "Demand Estimation with Heterogeneous Consumers and Unobserved Product Characteristics: A Hedonic Approach," Journal of Political Economy, University of Chicago Press, vol. 113(6), pages 1239-1276, December.
    8. James Heckman & Jose Scheinkman, 1987. "The Importance of Bundling in a Gorman-Lancaster Model of Earnings," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(2), pages 243-255.
    9. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    10. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    11. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74(2), pages 132-132.
    12. Jack Triplett, 2004. "Handbook on Hedonic Indexes and Quality Adjustments in Price Indexes: Special Application to Information Technology Products," OECD Science, Technology and Industry Working Papers 2004/9, OECD Publishing.
    13. Pollak, Robert A., 1989. "The Theory of the Cost-of-Living Index," OUP Catalogue, Oxford University Press, number 9780195058703.
    14. W. M. Gorman, 1980. "A Possible Procedure for Analysing Quality Differentials in the Egg Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(5), pages 843-856.
    15. James Heckman & Rosa Matzkin & Lars Nesheim, 2005. "Nonparametric estimation of nonadditive hedonic models," CeMMAP working papers CWP03/05, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    16. Gretsky, Neil E. & Ostroy, Joseph M. & Zame, William R., 1999. "Perfect Competition in the Continuous Assignment Model," Journal of Economic Theory, Elsevier, vol. 88(1), pages 60-118, September.
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    Cited by:

    1. Wong, Maisy, 2010. "The Relationship between Marginal Willingness-to-Pay in the Hedonic and Discrete Choice Models," MPRA Paper 51218, University Library of Munich, Germany.
    2. Mathilde Poulhes, 2017. "From Latin Quarter to Montmartre Investigating Parisian Real-Estate Prices," Working Papers 2017-13, Center for Research in Economics and Statistics.
    3. Kompa Krzysztof & Witkowska Dorota, 2014. "Construction Of Hedonic Price Index For The “Most Liquid” Polish Painters," Folia Oeconomica Stetinensia, Sciendo, vol. 14(2), pages 76-100, December.
    4. Dorota Witkowska, 2014. "An Application of Hedonic Regression to Evaluate Prices of Polish Paintings," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 20(3), pages 281-293, August.
    5. Vijay Aseervatham & Christoph Lex & Spindler, Martin, 2014. "How do unisex rating regulations affect gender differences in insurance premiums?," MEA discussion paper series 201416, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    6. Germán Coloma, 2011. "The Socio-Economic Significance of Four Phonetic Characteristics in North American English," CEMA Working Papers: Serie Documentos de Trabajo. 459, Universidad del CEMA.

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