Valuation tools - hedonic pricing method, Public Economics

Assignment Help:

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.


Related Discussions:- Valuation tools - hedonic pricing method

Is heterogeneity the sole cause of conflict of interests, Q. Is Heterogenei...

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

Central banking, examine the efficiency of quantitative credit control inst...

examine the efficiency of quantitative credit control instruments.

Public finance, Public Finance was always dealing with intervention through...

Public Finance was always dealing with intervention through fiscal instruments, including federal relationships between different tiers of governments and later on it subsumed Publ

Production possibility frontier, with the aid of labelled production possib...

with the aid of labelled production possibilty frontier explain the concept of opportunity cost

Capital accounting system, (1) The federal government is considering sellin...

(1) The federal government is considering selling tracts of federally owned land to private developers and using the revenues to provide aid to victims of an earthquake in a foreig

The myth of public goods by mark davis, summarize the basic tents of the ar...

summarize the basic tents of the argumentsin this case

Valuation of environment, Normal 0 false false false EN...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Pluralist society, what are the strengths and limitations of a pluralist so...

what are the strengths and limitations of a pluralist society

Show the traditional decision analysis, Q. Show the Traditional decision an...

Q. Show the Traditional decision analysis? Traditional decision analysis rests on the key assumptions about the type of information available to the decision maker. Powerful B

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd