Hedonic Price Function Research Articles

Measuring Economic Benefits of Flood Control Works

The purpose of this paper is to propose a simple and practical model in order to measure economic benefits of flood control works. This model estimates a change in both capital gain and land use due to the flood control works. Our approach is to forecast a change in land use in a small zone by adopting a growth curve method to express the difference in urbanzation between with and without the project. At the same time our model adopts a hedonic land price function which includes valuables of urbanzation and the safety level of flood. Applying this model to the S river flood control works, the benefit measured by land price change amounts to the 300 billion yen which is 10 times of its investment cost. Also comparing this result with the damage cost of 100 billion yen measured by the conventional property value method, it turns out that the indirect effect will be 2/3 of total benefits.

Hedonic prices and contractual contingencies

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.

THE EXCHANGEABILITY OF HEDONIC PROPERTY PRICE STUDIES*

ABSTRACT. Observations drawn from multiple markets are essential to the construction of indices of housing costs and to measures of demand for housing attributes. It is not evident when multiple markets exist or whether such markets exist for some attributes but not for others. We test for multiple markets by using Bayesian methods to assess the transferability (random exchangeability) of entire hedonic price expressions from one site and time to another, the transferability of hedonic price functions for particular attributes, and the degrees of similarity that hedonic price functions must have in order to be transferable. In our illustrations, price functions for structural housing attributes are generally transferable; prices for neighborhood attributes are not. Therefore, in our illustrations, the desired price indices and demand functions should be estimable for neighborhood attributes, but not for structural ones.

The hedonic price function as an envelope of bid functions; An exercise in applied economic theory

The hedonic price function as an envelope of bid functions; An exercise in applied economic theory

The relationship between the demand and supply of home financing and neighborhood characteristics: An empirical study of mortgage redlining

In this study the hypothesis that central cities are “redlined” was tested with data gathered from three separate central city and matching city-suburban areas. Potentially unmet mortgage demand was estimated from interviews of people who tried unsuccessfully to sell their homes. A hedonic price function revealed that these owners did not “overprice” their homes. However, they did not attribute their inability to sell to potential buyers' problems with financial institutions. A logit analysis of data provided by home buyers showed that individuals bought in the areas they preferred. We also found that central city and city-suburban home buyers got the type of mortgage they wanted at market terms and home owners in both areas had no difficulty in financing home repairs.

地域農林業資源の経済評価に関する研究 社会的便益に注目して

In the paper, we state the concept of resource and localized resource, and define the localized agricultural and forestry resources as available goods and services for agriculture and forestry in specific region. And we classify functions of the localized agricultural and forestry resource, paying attention to two characteristics, non-rivalness and non-excludability of resource.We take up the survey method, the voting method, the utility function method, the hedonic method and the travel cost method as the representaitive means evaluating benefits of the goods, which are difficult to measure by its market prices, and investigate theoretical backgrounds, availabilities and problems.Finally, we apply the hedonic method to eveluate the social benefit of the localized agricultural and forestry resources such as paddy fields, ordinary fields and forest in the urban Kinki district. We adopt a model separating farm households from non-farm households to satisfy the assumption of homogeneity of the preferences, and test it by Chow test. We apply the SUR to estimate the hedonic price functions. The estimated net benefit turns out to be two trillion two hundred billion yen in 1985.

Building technological capacity: A case study of the computer industry in India, 1975–1987

In this paper we will use the theoretical framework of hedonic price (-performance) functions, to demonstrate that the Indian computer industry has succeeded in closing the price-performance (technology) gap between mostly US produced micro- and minicomputers, and domestically fabricated micro- and minimodels. This paper tells the story of industrial policy changes that allowed an emerging domestic computer industry in India to obtain necessary technology inputs and that provided for an increasingly intense level of domestic competition. We analyze the effect of two key factors, access to technology and level of competition, on the level of technological capabilities of the computer sector. The paper uses India's experience with the computer industry to outline by inference a strategy for the successful acquisition of technology in a high-technology industry by a newly industrializing country.

A hedonic price analysis of nutritionally labeled breakfast cereals: Implications for nutrient labeling

Hedonic price techniques are used to determine the effects of nutrition content on purchasing behavior, and from this, to infer the effect of nutrition labeling information on consumer purchasing decisions. The technique applies regression analysis to the price of a product as a function of the product characteristics in order to estimate implicit values of specific product characteristics. By comparing these values over time, over market segments, with reported consumer preferences or with price data on products with similar characteristics in the market, the use of nutrition information by consumers can be inferred. As an example, hedonic price functions for breakfast cereal are estimated using data from four supermarkets. The results show that consumers need not be offered a lower price for products containing preservatives, and they are willing to pay more for products with an increased sugar and vitamin content. These results support the hypothesis that some consumers are reading labels to obtain certain specific nutrient information, but may not be using or are not able to use nutrition labeling to evaluate other product characteristics. The advantages of the hedonic price technique are that the data are readily available, the method is inexpensive, and the results pertain to current consumer purchaing decisions in the market. The technique is especially useful for assessing the effect of new labeling regulations on consumer purchasing decisions.

Hedonic Prices for a Nondurable Good: The Case of Breakfast Cereals

Numerous studies have estimated hedonic price functions for durable goods. In this paper, the authors apply the methodology to breakfast cereals, a nondurable good. They employ maximum likelihood to estimate the hedonic price functions using data from three large supermarkets. The price function depends on characteristics that provide taste, nutrition, and convenience to consumers, and the estimates yield insights into pricing policies, consumer preferences, and consumer use of information. Copyright 1991 by MIT Press.

Stumpage Prices in Southwestern Ontario: A Hedonic Function Approach

Abstract Timber used in the production of lumber in Southwestern Ontario varies in a number of characteristics, and the lump-sum stumpage price is expected to reflect differences in those characteristics. When heterogeneous inputs are used in production, the hedonic price function approach may be used to estimate marginal implicit values of the various input characteristics. Hedonic price functions were estimated for timber in Southwestern Ontario using pooled time-series cross-section data from a large sample of timber sales. The results indicate that volume, species composition, tree size, timber quality and distance to the purchasing mill all affect lump-sum stumpage prices. Estimates of the contributions that each of these characteristics makes to stumpage prices are presented. The estimated hedonic model was tested by comparing the model's forecasts of stumpage prices with forecasts made by personnel from the Ministry of Natural Resources. For. Sci. 36(4):1119-1132.

Hedonic Price Functions for Multi‐product Timber Sales in Southern Ontario

Hedonic Price Functions for Multi‐product Timber Sales in Southern Ontario

Hedonic prices and public goods: An argument for weighting locational attributes in hedonic regressions by lot size

The hedonic price technique is frequently used for valuing attributes of housing. In such an analysis a hedonic price function is specified: p = p(x). p is the price of a house and x is a vector of attributes of the house. The attributes include structural features such as size, age, garage, and fireplace and locational features such as neighborhood quality, crime, access to downtown, and air quality. The function is interpreted as an equilibrium price schedule for houses (see Rosen [5]). Its first derivative with respect to an element of x is an implicit price for that attribute. The price function is estimated typically using cross-sectional data from a housing market. I argue that the measure of each locational attribute in a hedonic price function should be weighted by lot size and that the measure of each structural attribute should not be weighted. The usual regression weights neither locational nor structural attributes. By my argument, if two houses are identical in every respect except that the measure of lot size of the first is twice that of the second, then the measure for air quality, access to parks, and so on for the first should be twice that of the second. I also argue that failure to weight locational attributes in a hedonic regression that should be weighted gives biased implicit price estimates for structural and locational attributes. The direction and degree of bias depend on the correlations between the attributes and lot size in the housing market, on the variance of lot size in the market, and on the lot size of the observation for which implicit price is being estimated.

On the choice of functional form for hedonic price functions

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.

Benefit Estimation of Multi Use Transport Facilities Improvement

The purpose of this paper is to construct hedonic price functions of residentialand commercial land which can depict the benefits of multi-use facilities improvement in large urban areas and to propose a method to estimate the various benefits by a unified measure, i. e. property value, using the hedonic price functions. The proposed hedonic functions include accessibility variable for trip purposep (ACP) by sum of actural transport movement divided by generalized costs and areestimated with hight goodness-to-fit. The accessibility measures for commuting and shopping, accessibility to large parks and a residential area restricted to medium and high rise housing dummy are ones of significant explanatory variables. The study examines the validity of the functions comparing with existing land price functions in similar areas and demonstrates the applicability of the method to estimate the benefits of a transport project with road, parks and light rail transit system on suburban areas in Tokyo.

Transformations to normality and selectivity bias in hedonic price functions

Zuehlke and Rasmussen (1988) presented an investigation of selectivity bias in hedonic price functions estimated from sold subsamples. The empirical findings were sensitive to the degree of skewness allowed by the choice of offer distribution. With the generalized model presented in this paper, the degree of skewness present in the offer distribution is determined empirically, rather than imposed by assumption. This allows a test of the hypothesis advanced in Zuehlke and Rasmussen, that by failing to allow for an upward skew in offers, the normal distribution incorrectly attributes skewness in observed selling prices to censoring.

Identifying willingness-to-pay for heterogeneous goods with factorial survey methods

It has been difficult to estimate underlying willingness-to-pay parameters for attributes of heterogeneous goods, such as environmental quality, though hedonic price functions. This paper links sociological factorial survey analysis with hedonic price analysis. Vignettes are multidimensional vectors, constructed orthogonally. Differences among vignette ratings allow estimation of individual valuations of the attributes. The paper establishes a theoretical framework linking the two analyses. Vignette and hedonic price functions are then estimated and linked at the margin to provide dollar values for marginal vignette ratings. Ratios of these ratings are then used to impute willingness-to-pay for attributes.

A COMPARISON OF CONTINGENT AND HEDONIC APPROACHES FOR THE ESTIMATION OF THE IMPROVEMENT OF RIVER ENVIRONMENT

The purpose of this paper is to discuss the applicability of the contingent and hedonic approach in order to identify the benefit of marginal emvironmental improvement of Nogawa River and Ichinoe-sakai River in Tokyo. First the study constructs a hedonic price function of land which includes river side park and water quality as major valiables. Second the study surveyes residence Willingness to Pay for these improvement using paired comparison questionnaire method and identifies bit price functions. Third this paper analyzes the discrepancy of the values estimated by two methods. The study finally finds 1) the benefit of river side park improvement is 11 to 19 thousand yen/m2. and discrepancy of the method is minimal. 2) Water quality improvement is 7 to 28 thousand yen/m2.

On a possible bias in estimates of hedonic price functions

On a possible bias in estimates of hedonic price functions

On the Choice of Funtional Form for Hedonic Price Functions

This study examines how errors in measuring marginal attribute pric es vary with the form of the hedonic price function. In simulations, consumers with known utility functions bid for houses with given attributes. Various forms of the hedonic function are estimated using equilibrium housing prices. Errors in estimating marginal attribute prices are calculated by comparing each consumer's equilibrium marginal bid vector with the gradient of the hedonic function. When all attributes are observed, linear and quadratic Box-Cox forms produce lowest mean percentage errors; however, when some attributes are unobserved or are replaced by proxies, linear and linear Box-Cox functions perform best. Copyright 1988 by MIT Press.

The market effects of zoning undeveloped land: Does zoning follow the market?

Through restricting the uses of land, zoning gives local governments the power to modify the dictates of unconstrained land markets. Many believe, however, that the regulations tend to coincide with, or anticipate, the market solution rather than modify it. The validity of this assertion is an empirical question and has not yet been adequately addressed. The purpose of this paper is to develop and apply an empirical test of the null hypothesis that zoning follows the market. The null hypothesis can be rejected only if land uses under zoning differ from what they would be without zoning. The first task in deriving the test is to differentiate between constrained and unconstrained land market allocations. It is shown that parameter estimates for hedonic price functions, when markets are zoned, cannot be interpreted to imply that the regulations constrain market prices. It is also shown that sample selection bias is a likely source of specification error in estimating hedonic price functions for zoned land markets.’ Since the sample selection of parcels to zone designations is unlikely to be random, the selection process must be accounted for in ordinary least-squares (OLS) estimation of zone constrained hedonic price functions. Fortunately, the “correction” for the specification error also provides a test for the market effects of zoning. A bid-price interpretation of hedonic price functions for land is presented in Section II. The sample selection bias issues are also discussed in that section and a formal test for the market effects of zoning is introduced.