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Improving Hedonic Estimation with an Inequality Restricted Estimator

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  • Gilley, Otis W
  • Pace, R Kelley

Abstract

Economists commonly estimate the value of characteristics not traded in explicit markets by hedonic pricing. Unfortunately, these nonexplicitly traded characteristics often display a lack of independent variation or multicollinearity. Often some prior information on the value of these characteristics is available from submarkets. This paper utilizes this type of prior information to circumvent multicollinearity problems in hedonic pricing models using an inequality restricted Bayesian estimator. The authors perform a Monte Carlo experiment and cross-validation analysis to demonstrate the superiority of inequality restricted Bayesian over ordinary least squares at many margins in a variety of situations typically faced in hedonic estimation. Copyright 1995 by MIT Press.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 77 (1995)
Issue (Month): 4 (November)
Pages: 609-21

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Handle: RePEc:tpr:restat:v:77:y:1995:i:4:p:609-21

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Web page: http://mitpress.mit.edu/journals/

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Cited by:
  1. Tatsuya Kubokawa & M. S. Srivastava, 2002. "Minimax Empirical Bayes Ridge-Principal Component Regression Estimators," CIRJE F-Series CIRJE-F-170, CIRJE, Faculty of Economics, University of Tokyo.
  2. James A. Bryant & Donald R. Epley, 1998. "Cancerphobia: Electromagnetic Fields and Their Impact on Residential Loan Values," Journal of Real Estate Research, American Real Estate Society, vol. 15(1), pages 115-129.
  3. Annunziata Vita, 2012. "La Valutazione Economica Dei Parchi Marini. Il Caso “Punta Infreschi”," Working Papers 3_220, Dipartimento di Scienze Economiche e Statistiche, Università degli Studi di Salerno.
  4. repec:sep:wpaper:3_320 is not listed on IDEAS
  5. Kelley Pace, R. & Barry, Ronald, 1997. "Sparse spatial autoregressions," Statistics & Probability Letters, Elsevier, vol. 33(3), pages 291-297, May.
  6. Kelley Pace, R., 1997. "Performing large spatial regressions and autoregressions," Economics Letters, Elsevier, vol. 54(3), pages 283-291, July.
  7. R. Kelley Pace, 1998. "Total Grid Estimation," Journal of Real Estate Research, American Real Estate Society, vol. 15(1), pages 101-114.
  8. van Wezel, M.C. & Kagie, M. & Potharst, R., 2005. "Boosting the accuracy of hedonic pricing models," Econometric Institute Research Papers EI 2005-50, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  9. Stephen Malpezzi, . "Hedonic Pricing Models: A Selective and Applied Review," Wisconsin-Madison CULER working papers 02-05, University of Wisconsin Center for Urban Land Economic Research.
  10. Michael Thompson & Steve Thompson, 2008. "Intra-industry differences in vertical integration, heterogeneous costs and pricing: the case of web hosting," Empirica, Springer, vol. 35(5), pages 503-523, December.
  11. Pace, R. Kelley & Barry, Ronald & Gilley, Otis W. & Sirmans, C. F., 2000. "A method for spatial-temporal forecasting with an application to real estate prices," International Journal of Forecasting, Elsevier, vol. 16(2), pages 229-246.
  12. Rose, Steven K., 1999. "Non-Market Valuation Techniques: The State of the Art," Working Papers 127688, Cornell University, Department of Applied Economics and Management.
  13. Stephanie E. Vanderford & Yoko Mimura & Anne L. Sweaney, 2005. "A Hedonic Price Comparison of Manufactured and Site-Built Homes in the Non-MSA United States," Journal of Real Estate Research, American Real Estate Society, vol. 27(1), pages 83-104.

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