Valuation tools - hedonic pricing method, Public Economics

Valuation Tools - Hedonic Pricing Method

This method is used for valuation of non-marketed goods and services. In this method we decompose the price of a commodity into the prices of its components or attributes. For greater clarity we explain this method with an example of housing prices. It is observed that the price of a house in an urban setting is ascribed to availability of various amenities such as open space, lower noise and congestion, and proximity to parks apart from the structure and size of the house. A house with better environmental amenities (other aspects such as proximity to public school, availability of public transport, police protection, decent neighbor hood, etc. remaining similar) usually fetches a higher price than one located in a polluted environ. Thus the difference in the price of the two houses can be considered as the willingness to pay for better quality environment.

This method needs to be used with caution as it is difficult to keep certain variables unchanged (in the above example, size of house and similarity of non-environmental factors) while changing environmental attributes. Secondly, much subjectivity is involved in the decomposition of the attributes, measurement of these attributes, and precise valuation these attributes. Thirdly, data requirement is enormous in the case of hedonic pricing method which hinders its applications.

Posted Date: 12/18/2012 5:14:32 AM | Location : United States







Related Discussions:- Valuation tools - hedonic pricing method, Assignment Help, Ask Question on Valuation tools - hedonic pricing method, Get Answer, Expert's Help, Valuation tools - hedonic pricing method Discussions

Write discussion on Valuation tools - hedonic pricing method
Your posts are moderated
Related Questions
The term Public Economics came into existence only in 1960s however a few titleswith nomenclature such as Public Finance had already started covering much ground,which is today cov

Q. Is Heterogeneity the sole cause of conflict of interests? Explain heterogeneity as a cause of variation of aspirations of agents leading to formation of various special inte

How does it work? how is its basic structure?

Explain the stages and various coordination mechanisms involved in policy processes. Discuss various factors that influenced the agenda setting in policy processes


What are objectives of fiscal policy

Q. Political Trans-national Activity? The dynamics resulting from the institutional interdependencies are of major importance for an understanding of the process of political t

Introduce uncertainties in attainments of policy outcomes, winning of elections, optimistic and pessimistic expectations of agents and relate it to various adjustments and converge

Why and how the State should intervene through government apparatusin the economic sphere of the country, has been a significant discourse in economicsfor long. According to one th

Discuss the basic features of international policy coordination. There may be two sources of interdependence between national economic policies, club goods and horizontal spill