![]() Consumer Price Indices (CPI) are designed to measure such changes. The hedonic function is normally estimated by regression analysis.Īll the goods and services that consumers purchase have a price and that price may vary over time, and these changes are a measure of inflation. One of the more widely-recognised examples of hedonic regression is the Consumer Price Index, which examines changes to the value of a basket of goods over time and the hedonic function is used to adjust for differences in characteristics between varieties of the good in calculating its price index. P i = h ( c i ) p is the price of a variety (or model) iof a good and ci is a vector of characteristics associated with the variety. The term “hedonic methods” refers to the use in economic measurement of a “hedonic function,” h ( ), In addition, Moulton 7 provides a information on the importance and expanded use of Hedonic Methods. See Lancaster K, 1 Griliches Z 2, 3 and Diewert 4-6 for detail discussions on the development and application of hedonic prices. ![]() The value of each component is then determined separately through regression analysis. Hedonic regression is a method used to determine the value of a good or service by breaking it down into its component parts.
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