This article investigates the consequences of labor market search for the theory of hedonic wages. We find that the introduction of search has surprising consequences for the theory of hedonic wages. In particular, we demonstrate that the equilibrium distribution of wage and nonwage amenity bundles generally bears little resemblance to workers' underlying preferences. A consequence of this analysis is that estimates of workers' marginal willingness to pay, derived from the conventional hedonic wage methodology, are biased. In addition, we demonstrate that search generates differences between firm‐level and employee‐level data that can cause substantial deviations in the estimates of hedonic wage equations.

The statistical properties of the certainty equivalence control rule and of the least squares estimates generated by this rule are examined experimentally in a linear model with two unknown parameters. It is found that the least squares certainty equivalence rule converges to its true value with probability one and is asymptotically efficient, having an asymptotic distribution with a variance as small as any other strongly consistent rule. However, while a linear combination of the parameter estimates is consistent, the evidence does not confirm that the individual estimates themselves are consistent. If these converge to their true values at all, they do so very slowly (on the order of (log t)').

T. W. Anderson, Naoto Kunitomo, Takamitsu Sawa, Evaluation of the Distribution Function of the Limited Information Maximum Likelihood Estimator, Econometrica, Vol. 50, No. 4 (Jul., 1982), pp. 1009-1027

This paper incorporates a Bayesian learning model into a hedonic framework to estimate the value that residents place on avoiding cancer risks from hazardous-waste sites. We show that residents are willing to pay to avoid cancer risks from Superfund sites before the U.S. Environmental Protection Agency (EPA) releases its assessment (known as the Remedial Investigation) of the site. Residents' willingness to pay to avoid risks actually decreases after the release of the Remedial Investigation, suggesting that the information lowers the perceived levels of risk. This estimated willingness to pay implies a statistical value of cancer similar to the value-of-life estimates in labor market studies.