(2) Check the sensitivity of environmental values derived from the hedonic pricing method to changes in how spatial control and other functional form assumptions are implemented. Goals / Objectives Objectives: There are three primary objectives for this project: (1) Explore the impact that exogenous information events have on environmental values derived from the hedonic pricing method. The hedonic method will likely continue to play an important role in environmental research and public policy in the future and therefore deserves further research on the method itself. Many other policy questions in the state of Virginia could be studied using this technique.

For example, policies on air quality, water quality and hazardous waste have been influenced by hedonic estimates (see Palmquist and Smith (2002)). The hedonic pricing method has been used to value a wide range of important environmental attributes that are important to the state of Virginia as well as the United States. Refining and improving the accuracy of the hedonic pricing method will help to produce more efficient environmental policy and thereby advance public welfare and scientific knowledge. The rapid transformation of the information environment in which homes are transacted. Currently it is an opportune time for investigation of these issues given the recent increase in computing power and the advent of Geographical Information Systems (GIS), and imperfect information and transaction costs). However, there is a need for research that aims at understanding the sensitivity of the values generated from hedonic pricing to some of the assumptions underlying the model that differ from some of the institutional details that are pervasive in housing markets (i.e. The hedonic pricing technique for valuing environmental attributes using real estate prices has been widely used for understanding the benefits and costs of changes in environmental quality. This statistical disentanglement of the components of real estate prices in a housing market is called a hedonic price regression. square feet, bathrooms, etc.) that make up the price of real estate. air quality, open space, etc.) from other real estate attributes (i.e.

Value of local environmental attributes (i.e. This method relies on real estate prices to disentangle the One of the most important and frequently used of these techniques is called the hedonic pricing method. Environmental economists have developed a number of techniques for overcoming the difficult problem of valuing environmental attributes. This is a difficult task since environmental quality is typically not traded and assigned prices in the marketplace. However, in order for government agencies to determine appropriate environmental public policy it is important to quantify the costs and benefits that may accrue from changes in environmental quality. Since these attributes are valuable and are often poorly allocated by private markets, state and federal governments have devoted significant resources to managing and protecting environmental assets. Non Technical Summary Environmental attributes such as air quality, water quality, open space, and outdoor recreation opportunities are valuable to Virginia and to the United States.

Hedonic pricing model