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Using stochastic frontier models to mitigate omitted variable bias in hedonic pricing models: A case study for air quality in Bogotá, Colombia

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  • Carriazo, Fernando
  • Ready, Richard
  • Shortle, James

Abstract

Hedonic pricing models use property value differentials to value changes in environmental quality. If unmeasured quality attributes of residential properties are correlated with an environmental quality measure of interest, conventional methods for estimating implicit prices will be biased. Because many unmeasured quality measures tend to be asymmetrically distributed across properties, it may be possible to mitigate this bias by estimating a heteroskedastic frontier regression model. This approach is demonstrated for a hedonic price function that values air quality in Bogotá, Colombia.

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Bibliographic Info

Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 91 (2013)
Issue (Month): C ()
Pages: 80-88

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Handle: RePEc:eee:ecolec:v:91:y:2013:i:c:p:80-88

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Web page: http://www.elsevier.com/locate/ecolecon

Related research

Keywords: Hedonic pricing model; Omitted variables; Air quality; Stochastic frontier model;

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References

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Cited by:
  1. Chad M. Baum, 2013. "The Missing Link between Research and Reality: the significance of the relationship between retail format and organic food consumption," Jena Economic Research Papers 2013-049, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.

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