ABSTRACT
The hedonic house price function relates the price of a house to its attributes via the mechanisms of the housing market. This chapter outlines the main issues concerned with the estimation of the hedonic house price function. Utility has been conceived as the property of an object that produces benefit, advantage, pleasure and happiness. There are many commodities that are not homogeneous but are traded on well-integrated markets. The hedonic price model was developed within an economic framework to study essentially aspatial composite commodities such as cars, refrigerators, washing machines, and personal computers. A fundamental issue in estimating the hedonic price function is choosing the functional form. The traditional hedonic specification assumes that the effects of structural attributes on property values are fixed across the housing market, and hence each property will have the same marginal implicit prices. 'The central problem in estimating hedonic equations involves the delineation of homogeneous submarkets'.
