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Revisiting the hedonic price method in the presence of market segmentation

Author

Listed:
  • Marc Baudry

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Masha Maslianskaia Pautrel

    (GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - AGROCAMPUS OUEST - Institut National de l'Horticulture et du Paysage)

Abstract

The article presents a theoretical analysis of the role of groupwise heterogeneity in the formation of hedonic prices. We show that in this case, submarkets emerge from market equilibrium. The existence of submarkets means that the hedonic price function is continuous, but the implicit price of characteristics is discontinuous at endogenous threshold values separating submarkets. Based on numerical simulations, the article highlights the way the groupwise heterogeneity could bias the estimation of the implicit price of environmental quality.

Suggested Citation

  • Marc Baudry & Masha Maslianskaia Pautrel, 2016. "Revisiting the hedonic price method in the presence of market segmentation," Post-Print hal-01392766, HAL.
    • Handle: RePEc:hal:journl:hal-01392766
    DOI: 10.1007/s10018-015-0122-5
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    Cited by:

    1. Oczkowski, Edward, 2021. "Estimating supply functions for wine attributes: a two-stage hedonic approach," Working Papers 321856, American Association of Wine Economists.
    2. Jin, Tanhua & Cheng, Long & Liu, Zhicheng & Cao, Jun & Huang, Haosheng & Witlox, Frank, 2022. "Nonlinear public transit accessibility effects on housing prices: Heterogeneity across price segments," Transport Policy, Elsevier, vol. 117(C), pages 48-59.

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