Abstract
Hedonic models are widely used to analyze markets for differentiated goods. This paper examines the appropriate specification of characteristics to be included in the hedonic price function. We develop a model that shows that the characteristics of the contract used to transfer a good from the buyer to the seller should also be included in the price function and present an empirical application of the model using data for single-family house transactions. The results indicate that the market exacts a price for the uncertainties created by contractual contingencies in the way described by the model.
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