Numerous studies have estimated hedonic price functions for durable goods. In this paper we apply the methodology to breakfast cereals, a nondurable good. We employ maximum likelihood to estimate the hedonic price functions using data from three large supermarkets. The price function depends on characteristics that provide tastes, nutrition and convenience to consumers, and the estimates yield insights into pricing policies, consumer preferences and consumer use of information.

A health-oriented choice model is developed in which individuals are viewed as producers of health and good health is desired for both consumption and investment purposes. Individuals are able to adjust their consumption of medical care in order to defend against reductions in air quality. A compensating variation type marginal willingness to pay expression is derived for improved air quality and the model is tested using cross-sectional data on employed adult residents of St. Louis, Missouri. Estimates of marginal willingness to pay for the average employed person are derived for a 30% reduction in ozone. These values range from $18.45 to $24.48 per year.