Advanced Search
MyIDEAS: Login

Revisiting the hedonic price method to assess the implicit price of environmental quality with market segmentation

Contents:

Author Info

  • Masha Maslianskaia-Pautrel

    ()
    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)

  • Marc Baudry

    ()
    (EconomiX - CNRS : UMR7166 - Université Paris X - Paris Ouest Nanterre La Défense)

Abstract

The article highlights the role of heterogeneity in the formation of hedonic prices. The article distinguishes between continuous and groupwise heterogeneity. The distinction helps understanding two important points. First, the analysis of market equilibrium with group wise heterogeneity makes explicit the role of participation and incentives compatibility constraints for groups of buyers. The case of continuous heterogeneity may be thought of as a limit case of groupwise heterogeneity when the number of groups goes to infinity and their masses go to zero. The hedonic price curve is then obtained as the solution of a differential equation resulting from a market clearing condition. Second, the article outlines that submarkets emerge from market equilibrium only in the case of groupwise heterogeneity. 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. Major implications for the valuation of environmental quality follow on. Based on numerical simulations, the article gives some insights into the way significant biases and drawbacks in the estimation of the implicit price of environmental quality can arise if the usual two steps procedure is implemented.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hal.archives-ouvertes.fr/docs/00/75/92/47/PDF/LEMNA_WP_201245.pdf
Download Restriction: no

Bibliographic Info

Paper provided by HAL in its series Working Papers with number hal-00759247.

as in new window
Length:
Date of creation: 02 Oct 2012
Date of revision:
Handle: RePEc:hal:wpaper:hal-00759247

Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00759247
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/

Related research

Keywords: environmental valuation ; discrete heterogeneity ; hedonic modeling ; vertical differentiation.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. James P. LeSage & R. Kelley Pace, 2004. "Models for Spatially Dependent Missing Data," The Journal of Real Estate Finance and Economics, Springer, vol. 29(2), pages 233-254, 09.
  2. Milgrom, Paul & Shannon, Chris, 1994. "Monotone Comparative Statics," Econometrica, Econometric Society, vol. 62(1), pages 157-80, January.
  3. Patrick Bayer & Robert McMillan & Kim Rueben, 2004. "An Equilibrium Model of Sorting in an Urban Housing Market," NBER Working Papers 10865, National Bureau of Economic Research, Inc.
  4. Gillen, Kevin & Thibodeau, Thomas & Wachter, Susan, 2001. "Anisotropic Autocorrelation in House Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 23(1), pages 5-30, July.
  5. Ivar Ekeland & James J. Heckman & Lars Nesheim, 2004. "Identification and Estimation of Hedonic Models," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S60-S109, February.
  6. K. K. Lancaster, 2010. "A New Approach to Consumer Theory," Levine's Working Paper Archive 1385, David K. Levine.
  7. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
  8. Kuminoff, Nicolai V., 2009. "Decomposing the structural identification of non-market values," Journal of Environmental Economics and Management, Elsevier, vol. 57(2), pages 123-139, March.
  9. Pace, R Kelley & Barry, Ronald & Sirmans, C F, 1998. "Spatial Statistics and Real Estate," The Journal of Real Estate Finance and Economics, Springer, vol. 17(1), pages 5-13, July.
  10. Basu, Sabyasachi & Thibodeau, Thomas G, 1998. "Analysis of Spatial Autocorrelation in House Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 17(1), pages 61-85, July.
  11. Palmquist, Raymond B., 2006. "Property Value Models," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 2, chapter 16, pages 763-819 Elsevier.
  12. repec:tep:teppwp:wp1203 is not listed on IDEAS
  13. Dennis Epple & Holger Sieg, 1999. "Estimating Equilibrium Models of Local Jurisdictions," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 645-681, August.
  14. Aaron S. Edlin & Chris Shannon, 1998. "Strict Single Crossing and the Strict Spence-Mirrlees Condition: A Comment on Monotone Comparative Statics," Econometrica, Econometric Society, vol. 66(6), pages 1417-1426, November.
  15. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Masha Maslianskaia-Pautrel, 2013. "Hedonic model with discrete consumer heterogeneity and horizontal differentiated housing," CEEES Paper Series CE3S-03/13, European University at St. Petersburg, Department of Economics.
  2. Masha Maslianskaia-Pautrel, 2013. "Hedonic model of segmentation with horizontal differentiated housing," Working Papers halshs-00856127, HAL.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00759247. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.