The common underlying framework, which we also adopt here, is that of a perfectly competitive market with heterogeneous buyers and sellers and traded product quality bundles and prices that arise endogenously in equilibrium. The willingness to pay for counterfactual transactions, together with structural parameters of preferences and technology, can be recovered with a general equilibrium theory of hedonic models, dating back to Tinbergen ( 1956) and Rosen ( 1974) see Heckman ( 2019) for an account of their respective contributions.

Nor can they inform us on the willingness to pay for characteristics of the good they would acquire under counterfactual market conditions, with different endowments, preferences, and technology. When unobservable taste for attributes drives the consumers’ choices, however, a simple regression of price on attributes cannot inform us on the willingness to pay for quality levels different from the ones characterizing the good actually acquired. The vast subsequent literature on hedonic regressions of prices on attributes aimed at measuring the marginal willingness of consumers to pay for the attributes of the good they acquired, or the marginal willingness of workers to accept compensation for the attributes of their occupations. Hedonic models were initially introduced by Court ( 1939) to price highly differentiated goods in terms of their attributes.

Hedonic definition