A hedonic model of prices is one that decomposes the price of an item into those separate components that determine the price. For example, Stewart and Jones (1998) Econ. Inquiry 36, 192 analyse the wages paid to baseball players on the basis of hitting and pitching performance, the player’s experience, and so on. A hedonic model would not necessarily separate all the factors that could be separated, only those that affect the usefulness to a buyer of what is being sold.

The UK Office of Fair Trading’s Quantitative Techniques In Competition Analysis, p. 49, available online, shows exactly how it’s done.