When Does Static Willingness to Pay Mislead? A Framework for Dynamic Hedonic Valuation
Abstract
Many policy counterfactuals depend on how consumers value product attributes such as sugar, sodium, caffeine, alcohol, or emissions. Standard hedonic and differentiated-products models interpret these valuations statically. That interpretation is restrictive when attributes are habit forming: observed prices then reflect both contemporaneous marginal value and the continuation value generated by current consumption. I develop a nonparametric revealed-preference framework for dynamic hedonic valuation, deriving necessary and sufficient conditions for rationalising observed prices and choices. Using household scanner data on cereal purchases, I show that the hedonic representation places real restrictions on prices, while habit formation improves behavioural coherence conditional on that representation. The results provide a diagnostic for when static attribute valuation is justified and when prices reveal more than contemporaneous marginal values.
Cite
@article{arxiv.2603.02456,
title = {When Does Static Willingness to Pay Mislead? A Framework for Dynamic Hedonic Valuation},
author = {Josephine Auer},
journal= {arXiv preprint arXiv:2603.02456},
year = {2026}
}