Hedonic Pricing

AAA

DEFINITION of 'Hedonic Pricing'

A model identifying price factors according to the premise that price is determined both by internal characteristics of the good being sold and external factors affecting it.

INVESTOPEDIA EXPLAINS 'Hedonic Pricing'

The most common example of the hedonic pricing method is in the housing market: the price of a property is determined by the characteristics of the house (size, appearance, features, condition) as well as the characteristics of the surrounding neighborhood (accessibility to schools and shopping, level of water and air pollution, value of other homes, etc.) The hedonic pricing model is used to estimate the extent to which each factor affects the price.

RELATED TERMS
  1. Geographical Pricing

    Adjusting an item's sale price based on the buyer's location. ...
  2. Headline Inflation

    The raw inflation figure as reported through the Consumer Price ...
  3. Economics

    A social science that studies how individuals, governments, firms ...
  4. Pricing Power

    An economic term referring to the effect that a change in a firm's ...
  5. Elasticity

    A measure of a variable's sensitivity to a change in another ...
  6. Proprietary Reverse Mortgage

    A loan that lets senior homeowners retrieve the equity in their ...
RELATED FAQS
  1. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>
  2. What is the difference between a Debit Order and a Standard Order in a bank reconciliation?

    While both debit orders and standard orders represent recurring transactions that must be considered in bank reconciliations, ... Read Full Answer >>
  3. How are joint ventures regulated in the United States?

    Joint ventures are a very specific type of business arrangement. They can be organized in several different legal structures, ... Read Full Answer >>
  4. What is the difference between marginal utility and marginal value?

    Depending on the context, marginal utility and marginal value can describe the same thing. The key word for each is "marginal," ... Read Full Answer >>
  5. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  6. How is cost basis calculated on an inherited asset?

    Typically, the cost basis on inherited assets is the fair market value as of the time of the decedent's death or actual transfer ... Read Full Answer >>
Related Articles
  1. Home & Auto

    To Rent Or Buy? The Financial Issues

    Thinking of buying a home? We look at the initial and ongoing costs, as well as the so-called benefits.
  2. Active Trading Fundamentals

    Forces That Move Stock Prices

    You can't predict exactly how stocks will behave, but knowing what affects prices will put you ahead of the pack.
  3. Investing Basics

    Understanding Total Return Swaps

    A total return swap is a contract in which a payer and receiver exchange the credit risk and market risk of an underlying asset.
  4. Economics

    Understanding the Top Line

    Top line refers to a company’s gross sales without any reductions for discounts or returns.
  5. Investing Basics

    How Does a Strangle Work?

    A strangle is the sale or purchase of both a put and call option on the same underlying investment with the same expiration.
  6. Economics

    What's a Stock Keeping Unit (SKU)?

    A SKU, or bar code, is a unique identification code that retail and wholesale sellers use to track their inventory of products and services.
  7. Economics

    What Is a Quota?

    In business, quota usually refers to the sales target for a salesperson or a sales team.
  8. Economics

    Understanding the Product Life Cycle

    Product life cycle is the period of time during which a product is conceived and developed, brought to market and eventually removed from the market.
  9. Fundamental Analysis

    Explaining Price Targets

    A price target is what an investment analyst projects a security’s future price to be.
  10. Fundamental Analysis

    Present Value Interest Factor of Annuity (PVIFA)

    PVIFA can be used to calculate the present value of a series of annuities by considering cash flows and depreciation.

You May Also Like

Hot Definitions
  1. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  2. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  3. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  4. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  5. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  6. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!