Hedonic Regression

DEFINITION of 'Hedonic Regression'

A method used to determine the value of a good or service by breaking it down into its component parts. The value of each component is then determined separately through regression analysis. For example, the value of a home can be determined by separating the different aspects of the home - number of bedrooms, number of bathrooms, proximity to schools - and using regression analysis to determine the value of each variable.

One of the more widely-recognized examples of hedonic regression is the Consumer Price Index, which examines changes to the value of a basket of goods over time.

BREAKING DOWN 'Hedonic Regression'

The word "hedonic" refers to pleasure, which economists link to the perceived value each part a good or service has to someone. This sort of regression analysis provides a good - but not perfect - estimate of the value consumers place on a part of a whole.

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