Hedonic pricing

The hedonic pricing method is an example of revealed preference valuation (see below) and is most commonly applied using data from housing and labour markets. The hedonic pricing method estimates the value of a non-market good by analysing how it affects prices for related market goods. For example, two properties may be identical, but one might be located in an area close to a large park, while the other is in an area with no parks. The differences in the value of these two properties provides an estimate of how much buyers are willing to pay to live in an area with easy access to a park or green space.