Regression modelEnvironmental and Resource Economics
Hedonic Pricing Model
The hedonic pricing model, developed by Sherwin Rosen in 1974 and building on Kevin Lancaster's characteristics theory (1966), is an econometric method for valuing the implicit prices of product attributes by regressing market prices on observed characteristics. It reveals the trade-offs consumers are willing to make among product features and can be used to infer valuations of environmental amenities (e.g., air quality via house prices) and to adjust price indices for quality changes.
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Sources
- Rosen, S. (1974). Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition. Journal of Political Economy, 82(1), 34–55. DOI: 10.1086/260169 ↗
- Lancaster, K. J. (1966). A New Approach to Consumer Theory. Journal of Political Economy, 74(2), 132–157. DOI: 10.1086/259131 ↗
- Epple, D. (1987). Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products. Journal of Political Economy, 95(1), 59–80. DOI: 10.1086/261442 ↗