Applying the Hedonic Method

Published

September 18, 2013

Author(s)

Stanley W. Gilbert

Abstract

Often, advances in measurement science will enable the development of new product innovations. When trying to estimate the value of the benefits of an advance in measurement science, it can be difficult to estimate the value of those new product innovations, especially if they are contained within composite goods. The hedonic method provides a mechanism for the impact on the price of a composite good of a new product innovation. Under the right circumstances, and with the right data, it can even help estimate the value to the consumer of those new product innovations. This helps in estimating the benefits of advances in measurement science, and in some cases can help show where additional resources could be profitably spent in seeking further advances. This Technical Note describes what the hedonic method does, how one is done, what its limitations are. It starts with a discussion of the theory behind hedonic studies, including a discussion of the basic assumptions behind it. It then goes on to describe how such studies are done. It specifically discusses basic studies that simply estimate the price function for a composite good, including some of the potential problems that could arise in such a study. It then goes on to discuss more complete studies that estimate supply and or demand functions for the market for a composite good. It concludes with an annotated bibliography.

Citation

Technical Note (NIST TN) - 1811

Report Number

1811

NIST Pub Series

Technical Note (NIST TN)

Pub Type

NIST Pubs

Download Paper

https://doi.org/10.6028/NIST.TN.1811

Keywords

Hedonic Method, Hedonic Bibliography, Composite Goods, Theory and Practice

Citation

Gilbert, S. (2013), Applying the Hedonic Method, Technical Note (NIST TN), National Institute of Standards and Technology, Gaithersburg, MD, [online], https://doi.org/10.6028/NIST.TN.1811 (Accessed April 18, 2024)