On the choice of functional form for hedonic price functions

Abstract

The empirical results presented in this paper demonstrate the usefulness of quadriatic models in the estimation of hedonic price functions. We propose a quadriatic semi-log model, a restricted case of the quadriatic Box-Cox model, whose standardized marginal attribute prices are linear functions of the attribute vector. This specification outperforms the linear Box-Cox specification in terms of explanatory power, and captures much of the increase in explanatory power provided by the quadriatic Box-Cox model without the corresponding loss in the ability to interpret the coefficient estimates. For policy applications, the quadriatic Semi-log model provides a useful alternative to linear specification.