The Hedonic Pricing Method Professor A. Markandya Department of Economics and International Development University of Bath [email protected] tel. +44 1225 386954 Environmental Economics 2 March 2006 Hedonic pricing method Revealed preferences No questionnaire!
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That is, the marginal rate of substitution between each characteristic n and the consumption of other goods is equal to the ‘price’ (coefficient) of n and the price of c.
is the hedonic price function
p(s,n): c = m – p(s,n)
Hedonic price function
Where w=wage rage, p=fatal risk in the workplace faced by worker i, q=risk of non-fatal injury, WC = worker comp., and the x’s are other worker and job characteristics (age, experience, etc.)
House price falls by 245US$ if pollution is present
Ridker and Henning estimate the environmental damage of air pollution in St. Louis to be 82 million dollars => need to compare this estimate with the cost of a public program to clean pollution
IMPLIP = (0.16871 / BROADL) PRICEX
IMPLIP = EXP( 6.34) REDDHOU 0.76 COMPON 0.11 BROADL -0.85