These contributions, which were basically empirical and ad hoc, were followed by the
more formalized work of Griliches (1961), who pointed out "...we are interested in the effect of
quality change on measured prices and price indexes, our first job is to find what relationship, if
any, there is between the price of a particular commodity and its 'quality'." (Griliches 1961, p.
57).
The first attempts to create a theoretical formulation for this approach were made by
Houthakker (1952) and by Tinbergen (1956). However, it was not until the mid-sixties that
Lancaster (1966 and 1971) developed the consumer behavior theory oriented toward the
demand for heterogeneous commodities with identifiable and objectively valuable attributes.
Nevertheless, it was not until the publication of Rosen’s works (1974) that hedonic methodology
acquired a microeconomic foundation that made it possible to formalize empirical contributions.
From this time onwards, the model developed by Rosen has usually been accepted as the
paradigm of the hedonic approach.
Rosen established in the hedonic price function the relationship between the price of
the differentiated commodity and the quantities and implicit prices of the attributes of the given
commodity. This function underlies the relationship between supply and demand for a specific
commodity’s attributes. In other words, as pointed out by Hulten (2003), the hedonic pricing
function establishes a relationship between the demand curves of consumers with
heterogeneous tastes for different combinations of attributes within each category of
commodities and their corresponding supply functions with different costs of factors and
production functions for each attribute.
From an analytical point of view, the application of Rosen’s model involves obtaining a
pricing function that relates the price of a differentiated good P to its attributes x1...xk. In other
words, P = f(x1,...,xk) where the implicit prices of such attributes are given by ∂P∕∂xk and,
depending on the functional form chosen, different values are obtained. Neither Rosen’s model
nor later contributions offered a criterion for selecting the most suitable functional form to obtain
the best results and, thus, this has become an empirical issue.
Traditionally, the most frequently used functional forms were the linear, log-linear and
double-log functional forms. In recent years, many different functional forms derived from Box-