What does hedonic regression have to do with innovation?

Question

Hi - As we all know :-), hedonic regression is used to normalize economic analysis against changes in quality/utility. I am doing research for a class and am very interested in any more information about how hedonic regression is relevant to innovation in general.

Answer 1

Innovations that improve the quality of products are used to justify increases in price.
For example, a refrigerator today costs more than a refrigerator 20-30 years ago. But the refrigerators of today are better than a refrigerator from 20 years ago. Whereas the older refrigerators required manual defrosting, ice trays placed in the freezer to make ice, and pitchers in the refrigerator to make cold water, the modern refrigerator is frost-free and usually comes with an icemaker and water dispenser that can be connected to a water line. These improved features are what is called hedonicsm or utility.

The company, which offers the new or modified product, will be happy to say that there is an improvement, and the technicians, who developed the product, will be eager to provide exact calculations of this quality change. However, how many technical improvements are being offered every day and there is no market for them? How many inventors have patents that are registered but there are only a few or no buyers at all for the product? The crucial point here is that only pseudo-standards are available for evaluation, the assessment of the utility of a product is subjective and individual, and for the individual himself, the standards of evaluation change according to the specific situation.

Answer 2

Innovation is the only true way to increase efficiency and to shift the production possibilities curve.

Hedonic Regression will be needed in this case to follow the curve upwards so that you can see where it lands.

For example, you could study the effect of the Internet and communication pre and post 1990 for businesses.

You would definitely need hedonic regression to normalize the analysis.