Rosen’s model simulates a competitive market and foresees the simultaneous estimation of demand and supply function. The theory at the basis of hedonic methods have been formulated by Rosen (1974 ) and successively improved with regards to the valuation of environmental goods by Freeman (1979 ). It is based on the identification of the part of value which regards the characteristic to be evaluated, and in case of variations of the characteristic, on the possibility of estimating its demand function. The approach assumes that the economic value of each attribute influences the total value of the commodity and can thus be revealed as a difference in price, for instance real estate properties, assuming all other characteristics to remain constant. Real estate properties are very interesting in this context, as their values are strongly influenced by locational characteristics. Obviously, the more closely the market good is related to the use of a natural resource, the more suitable is this approach for the evaluation of the natural resource. The use of this approach is of particular interest in the field of environmental valuation, as it can be assumed that the values attributed to natural resources are attributes of commodities which are sold on the market. Of single characteristics of a good on the basis of market values of the whole good. The hedonic approach to evaluation attempts to estimate the economic value using implicit prices It is one frequently applied methodology for the assessment of natural values based on market values. On real estate markets for example, it is not possible to purchase separately the room, the preferred location, the panoramic qualities, quality of air or of surrounding landscape. The hedonic approach is based on the assumption that goods can be considered aggregates of different attributes, some of which, as they cannot be sold separately, do not have an individual price.
The hedonic approach to economic assessment can be used for evaluating the economic value of environmental goods such as noise, air or water quality, landscape and similar goods.
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