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Functional Form Model Specification: An Application to Hedonic Pricing

Published online by Cambridge University Press:  15 September 2016

Jeff E. Brown  and
Don E. Ethridge
Jeff E. Brown
Affiliation:
Department of Agricultural Economics, Texas Tech University
Don E. Ethridge
Affiliation:
Department of Agricultural Economics, Texas Tech University
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Abstract

A combination of conceptual analysis and empirical analysis—partial regression and residuals analysis—was used to derive an appropriate functional form hedonic price model. These procedures are illustrated in the derivation of a functional form hedonic model for an automated, econometric daily cotton price reporting system for the Texas-Oklahoma cotton market. Following conceptualization to deduce the general shapes of relationships, the appropriate specific functional form was found by testing particular attribute transformations identified from partial regression analysis. Minimizing structural errors across attribute levels and estimation accuracy were used in determining when an appropriate functional form for both implicit and explicit prices was found.

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Type
Articles
Information
Agricultural and Resource Economics Review , Volume 24 , Issue 2 , October 1995 , pp. 166 - 173
Copyright
Copyright © 1995 Northeastern Agricultural and Resource Economics Association 

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