Hedonism vs. Nihilism: No Arbitrage and Tests of Urban Economic Models
AbstractWe present two notions of “no arbitrage” in urban economic models and show that there is no model satisfying both. The standard hedonic housing model of urban economics and its generalizations are consistent with the first of these, but inconsistent with the second. We present a model consistent with the second notion of “no arbitrage” and a continuum of models consistent with neither notion that are observationally equivalent to the standard model, even if the utility function of consumers is known. Only one of these is the standard model. Thus, the available tests of the standard model cannot provide much evidence of its validity. Finally, we examine nonlinear price systems consistent with the second notion of "no arbitrage" and their welfare consequences.
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Bibliographic InfoPaper provided by EconWPA in its series Urban/Regional with number 0407012.
Length: 19 pages
Date of creation: 29 Jul 2004
Date of revision: 16 Feb 2005
Note: Type of Document - pdf; pages: 19
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Monocentric City; Hedonic Models; No Arbitrage;
Other versions of this item:
- Berliant, Marcus & McMillen, Daniel P., 2006. "Hedonism vs. nihilism: No arbitrage and tests of urban economic models," Regional Science and Urban Economics, Elsevier, vol. 36(1), pages 118-131, January.
- Berliant, Marcus & McMillen, Daniel P., 2003. "Hedonism vs. Hihilism: No Arbitrage and Tests of Urban Economic Models," Working Papers 1166, California Institute of Technology, Division of the Humanities and Social Sciences.
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
- D41 - Microeconomics - - Market Structure and Pricing - - - Perfect Competition
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-02 (All new papers)
- NEP-GEO-2004-08-02 (Economic Geography)
- NEP-MIC-2004-08-02 (Microeconomics)
- NEP-URE-2004-08-02 (Urban & Real Estate Economics)
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.:
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