Education Briefing Property valuation: the hedonic pricing model: the application of search-and-matching models

Gaetano Lisi

Journal of Property Investment & Finance, 2021, vol. 40, issue 1, 99-107

Abstract: Purpose - The aim of this education briefing is to comment upon how basic hedonic pricing models for the valuation of property can be expanded and developed. In this case, the briefing illustrates the use of the new economic approach to the analysis of housing markets, namely the search-and-matching models. Design/methodology/approach - This education briefing discusses the connection of two important economic theories: the hedonic price theory and the search-and-matching theory. Findings - This education briefing gives an example of a (non-linear) form of the hedonic price function. Practical implications - In cases of mass appraisals, hedonic pricing models can provide a broad indication of value across submarkets and this education briefing demonstrates a theoretical model that can be used to provide a theoretical groundwork for the use of a concave hedonic price function in empirical estimates. Originality/value - This education briefing shows how basic hedonic pricing models can be enhanced by a search-and-matching approach to determine property values.

Keywords: Housing prices; Hedonic price theory; Search-and-matching models; House search process; Trading frictions (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jpifpp:jpif-12-2020-0138

DOI: 10.1108/JPIF-12-2020-0138

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