ABSTRACT
This chapter introduces reader to hedonic price theory, examples of relevant areas where the method has been applied and how they can empirically estimate hedonic pricing models using Excel. The traditional approach of consumer theory was that the product itself was the direct object of utility. The general specification of the hedonic pricing model assumes that the prices consumers pay for products (or services) are a function of their intrinsic characteristics. Beyond housing prices, hedonic pricing models have been used in the automobile industry. Griliches specified a hedonic price model to analyze the price–quality relationship of US passenger four-door sedans for the years 1937, 1950 and 1954–1960.
