Environmental change and hedonic cost functions for automobiles

This paper focuses on how changes in the economic and regulatory environment have affected production costs and product characteristics in the automobile industry. We estimate “hedonic cost functions” that relate product-level costs to their characteristics. Then we examine how this cost surface has changed over time and how these changes relate to changes in gas prices and in emission standard regulations. We also briefly consider the related questions of how changes in automobile characteristics, and in the rate of patenting, are related to regulations and gas prices.