Hedonic pricing is an economic pricing model that seeks to determine the value of a product or service based on the perceived characteristics or attributes it possesses. In this model, the price of a good is broken down into its individual components or features, and the impact of each characteristic on the overall price is assessed.
This pricing approach is often used in real estate, where the value of a property is determined by analyzing various factors such as location, size, amenities, and other specific attributes. It can also be applied to consumer goods, services, or any item with discernible features that contribute to its perceived value.
Hedonic pricing helps in understanding how consumers assign value to different qualities of a product or service, allowing businesses to make informed pricing decisions based on the preferences and priorities of their target market.