Working Paper

Hedonic price functions


Lars Nesheim

Published Date

25 September 2006


Working Paper (CWP18/06)

A hedonic price function describes the equilibrium relationship between characteristics of a product and its price. They are used to predict pricesof 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.