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Hedonic model of segmentation with horizontal differentiated housing

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  • Masha Maslianskaia-Pautrel

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    (TEPP - Travail, Emploi et Politiques Publiques - CNRS : FR3435 - Université Paris-Est Marne-la-Vallée (UPEMLV), LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272, GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - Université du Maine)

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    Abstract

    The purpose of this paper is to study how the hedonic equilibrium is modified when group-wise consumer heterogeneity with horizontal differentiated housing supply is assumed. We complete the hedonic segmentation analysis of Baudry and Maslianska¨ıa-Pautrel (2011a,b) for vertical differentiation of housing supply by investigating the more realistic case of horizontal differentiation. Our results confirm the segmentation of the hedonic price function at equilibrium and the discontinuity of the implicit price of environmental quality on the borders of the segments. We also demonstrate that horizontal differentiation can lead to a partial sorting of consumer demand for housing attributes at hedonic equilibrium. Finally we show that according to model specification, the group-wise heterogeneity with horizontal differentiation can lead to modification of welfare assessment related to changes in environmental quality.

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    Bibliographic Info

    Paper provided by HAL in its series Working Papers with number halshs-00856127.

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    Date of creation: 30 Aug 2013
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    Handle: RePEc:hal:wpaper:halshs-00856127

    Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00856127
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    Related research

    Keywords: Hedonic model; Group-wise consumers' heterogeneity; Horizontal differentiation;

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    1. Marc Baudry & Masha Maslianskaïa-Pautrel, 2011. "Une remise en cause de la méthode des prix hédoniques en présence d'une segmentation de marché," Revue économique, Presses de Sciences-Po, vol. 62(3), pages 567-578.
    2. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132.
    3. Robert A. Simons & Jesse D. Saginor, 2006. "A Meta-Analysis of the Effect of Environmental Contamination and Positive Amenities on Residential Real Estate Values," Journal of Real Estate Research, American Real Estate Society, vol. 28(1), pages 71-104.
    4. Marc Baudry & Masha Maslianskaia-Pautrel, 2012. "Revisiting the hedonic price method to assess the implicit price of environmental quality with market segmentation," EconomiX Working Papers 2012-45, University of Paris West - Nanterre la Défense, EconomiX.
    5. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    6. 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.
    7. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
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