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

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.

Citation

Lisi, G. (2022), "Education Briefing Property valuation: the hedonic pricing model: the application of search-and-matching models", Journal of Property Investment & Finance, Vol. 40 No. 1, pp. 99-107. https://doi.org/10.1108/JPIF-12-2020-0138