Hedonic Models of Heterogeneous Goods

Abstract

More often than not economists treat marketed goods as homogeneous and estimate demand curves for goods with homogeneous quality. An economist might be interested in estimating the demand for water from a public water supply, where public water is viewed as a homogeneous good whose quality declines as a result of contamination. Bottled water would normally be considered a separate although related good. A market demand curve would exist for each, although each demand would be conditioned on the price and quality of the other.