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Estimation of Bid Functions for Location Choice and Price Modeling with a Latent Variable Approach

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  • Ricardo Hurtubia
  • Michel Bierlaire

Abstract

A new approach for the estimation of bid-rent functions for residential location choice is proposed. The method is based on the bid-auction approach and considers that the expected maximum bid of the auction is a latent variable that can be related to observed price indicators through a measurement equation. The method has the advantage of allowing for the estimation of the parameters of the bid function that explain the heterogeneous preferences of households for location while simultaneously adjusting the expected maximum bid to reproduce realistic values. The model is applied and validated for a case study on the city of Brussels. Results show that the proposed model outperforms other methods for bid-rent estimation, both in terms of real estate prices and spatial distribution of agents, especially when detailed data describing the real estate goods and their prices is not available. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Ricardo Hurtubia & Michel Bierlaire, 2014. "Estimation of Bid Functions for Location Choice and Price Modeling with a Latent Variable Approach," Networks and Spatial Economics, Springer, vol. 14(1), pages 47-65, March.
    • Handle: RePEc:kap:netspa:v:14:y:2014:i:1:p:47-65
    DOI: 10.1007/s11067-013-9200-z
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    Cited by:

    1. Tomás Cox & Ricardo Hurtubia, 2021. "Latent Segmentation of Urban Space through Residential Location Choice," Networks and Spatial Economics, Springer, vol. 21(1), pages 199-228, March.
    2. Thomas E. Guerrero & C. Angelo Guevara & Elisabetta Cherchi & Juan de Dios Ortúzar, 2021. "Addressing endogeneity in strategic urban mode choice models," Transportation, Springer, vol. 48(4), pages 2081-2102, August.
    3. Jason Hawkins & Adam Weiss & Khandker Nurul Habib, 2021. "Household-level dynamics in residential location choice modelling with a latent auction method," Environment and Planning B, , vol. 48(2), pages 314-330, February.
    4. Tomás Cox & Ricardo Hurtubia, 2021. "Subdividing the sprawl: Endogenous segmentation of housing submarkets in expansion areas of Santiago, Chile," Environment and Planning B, , vol. 48(7), pages 1770-1786, September.
    5. Tomás Cox & Ricardo Hurtubia, 2022. "Compact development and preferences for social mixing in location choices: Results from revealed preferences in Santiago, Chile," Journal of Regional Science, Wiley Blackwell, vol. 62(1), pages 246-269, January.

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