01868cam a22002297 4500001000600000003000500006005001700011008004100028100002400069245007800093260006600171490004100237500001600278520094100294530006101235538007201296538003601368690007901404710004201483830007601525856003701601w5061NBER20140424063038.0140424s1995 mau||||fs|||| 000 0 eng d1 aFeenstra, Robert C.10aExact Hedonic Price Indexesh[electronic resource] /cRobert C. Feenstra. aCambridge, Mass.bNational Bureau of Economic Researchc1995.1 aNBER working paper seriesvno. w5061 aMarch 1995.3 aThe purpose of this paper is to identify conditions under which hedonic price indexes provide an exact measure of consumer welfare. Our results provide a rationale for existing practices in the case where prices equal marginal costs. In that case, both the marginal value of characteristics and a fixed-weight price index can be estimated from a hedonic regression. Using the marginal value of characteristics, we show how to construct bounds on the exact hedonic price index. When prices are above marginal costs then our bounds still apply, but the value of characteristics cannot be measured so easily. Since the price-cost markups are an omitted variable in the hedonic regression, they will bias the coefficients obtained. For a special class of utility functions, we argue that a linear regression will still provide a measure of the marginal value of characteristics, but a log-linear regression will overstate these values. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aC43 - Index Numbers and Aggregation2Journal of Economic Literature class.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w5061.4 uhttp://www.nber.org/papers/w5061