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

Principles of multi unit finance, what are principles of multi unit finance...

what are principles of multi unit finance and fiscal federalism in India

Factors for evaluating a policy instrument, Normal 0 false fa...

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

Public finance, What are the objectives of pubic finance

What are the objectives of pubic finance

Determine the natural rate of unemployment, Suppose the firm mark up over t...

Suppose the firm mark up over the cost is 10% and the wage setting equation is W=P (1-u) where U is the unemployment rate. a) Find out the real wage rate implied by the price se

Valuation tools, Normal 0 false false false EN-IN X-N...

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

Policy process mechanism, explain the stages and various coordination mecha...

explain the stages and various coordination mechanisms involved in policy processes

What makes a public opinion poll scientific, What makes a public opinion po...

What makes a public opinion poll scientific 1. To what extent do we really think about political issues as individuals, or are we more influenced by our environment -family, t

International trade and finance, explain how under the WTO differential tre...

explain how under the WTO differential treatment in reverse is different from the special and differential treatment

Privatization, privatization can always decentralise economic power. critic...

privatization can always decentralise economic power. critically discuss

Policy composition and policy reversal, Let us now consider a situation in ...

Let us now consider a situation in which we know the timing of a change in policy but are unsure about the composition of the future policy. The association of different policy co

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