Title

On the issue of functional form choice in hedonic price functions: Further evidence.

Abstract

Abstract

Historically, researchers applying the hedonic technique devoted little effort to testing alternative functional forms. This study used Box-Cox transformations on a hedonic model examining property value effects of a closed landfill to help select among alternative functional forms. Although this particular application found that a log-log functional form was appropriate, it appears that functional form may vary by problem and case study area selected. Benefit estimates generated using the hedonic technique may be substantial over- or underestimates if the incorrect functional form is chosen. Proximity to the landfill had no significant effect on properly values.

Historically, researchers applying the hedonic technique devoted little effort to testing alternative functional forms. This study used Box-Cox transformations on a hedonic model examining property value effects of a closed landfill to help select among alternative functional forms. Although this particular application found that a log-log functional form was appropriate, it appears that functional form may vary by problem and case study area selected. Benefit estimates generated using the hedonic technique may be substantial over- or underestimates if the incorrect functional form is chosen. Proximity to the landfill had no significant effect on property values.

Publication Date

9-1997

Journal Title

Environmental Management

Publisher

Springer

Digital Object Identifier (DOI)

10.1007/s002679900065

Document Type

Article