Mathematics and Financial Economics

, Volume 8, Issue 4, pp 405–416 | Cite as

Entropy methods for identifying hedonic models

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Abstract

This paper contributes to the literature on hedonic models in two ways. First, it makes use of Queyranne’s reformulation of a hedonic model in the discrete case as a network flow problem in order to provide a proof of existence and integrality of a hedonic equilibrium and efficient computation of hedonic prices. Second, elaborating on entropic methods developed in Galichon and Salanié (Cupid’s invisible hand: social surplus and identification in matching models. Working Paper, 2014), this paper proposes a new identification strategy for hedonic models in a single market. This methodology allows one to introduce heterogeneities in both consumers’ and producers’ attributes and to recover producers’ profits and consumers’ utilities based on the observation of production and consumption patterns and the set of hedonic prices.

Keywords

Hedonic equilibrium Generalized entropy Single market identification 

JEL classification

C31 C62 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2014

Authors and Affiliations

  1. 1.CEPS/INSTEADEsch-sur-AlzetteLuxembourg
  2. 2.Sciences PoParisFrance
  3. 3.Penn State UniversityState CollegeUSA

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