ABSTRACT
This chapter covers the tradition of economics sometimes referred to as the 'characteristics approach' and sometimes included in 'hedonic theory'. The hedonic approach analyses the individual's choice of product quality. Product quality is defined purely in terms of the objective characteristics that the product has. In quality theory, the assumption must be that milk and kerosene are two characteristics of a single product, so they are consumed together. Hedonic theory depends on a small number of very precise assumptions on indifference curves. It is by no means certain that the mega-attributes would conform to the requirements of convexity, transitivity, and so on any more than ordinary attributes. Indifference theory requires that the indifference surface should be calculated for a single individual, rather than at market level. It has been suggested in this chapter that introducing this level of realism into the analysis very soon leads to an unmanageable level of complexity.
