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Estimating the Willingness to Pay to Avoid Violent Crime: A Dynamic Approach

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  • Kelly C. Bishop
  • Alvin D. Murphy

Abstract

The hedonic model, which has been used extensively in the Environmental, Urban, and Real Estate literatures, allows for the estimation of the implicit prices of housing and neighborhood attributes, as well as households' demand for these non-marketed amenities. A recognized drawback of the existing hedonic literature is that the models assume a myopic decision-maker. In this paper, we estimate a dynamic hedonic model and find that the average household is willing to pay $472 per year for a ten percent reduction in violent crime. In addition, we find that the traditional, myopic model suffers from a 21 percent negative bias.

Suggested Citation

  • Kelly C. Bishop & Alvin D. Murphy, 2011. "Estimating the Willingness to Pay to Avoid Violent Crime: A Dynamic Approach," American Economic Review, American Economic Association, vol. 101(3), pages 625-629, May.
  • Handle: RePEc:aea:aecrev:v:101:y:2011:i:3:p:625-29
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    References listed on IDEAS

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    1. V. Joseph Hotz & Robert A. Miller, 1993. "Conditional Choice Probabilities and the Estimation of Dynamic Models," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 497-529.
    2. 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 60-109, February.
    3. Patrick Bayer & Robert McMillan & Alvin Murphy & Christopher Timmins, 2016. "A Dynamic Model of Demand for Houses and Neighborhoods," Econometrica, Econometric Society, vol. 84, pages 893-942, May.
    4. Patrick Bayer & Robert McMillan & Alvin Murphy & Christopher Timmins, 2011. "A Dynamic Model of Demand for Houses and Neighborhoods," NBER Working Papers 17250, National Bureau of Economic Research, Inc.
    5. Epple, Dennis, 1987. "Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 59-80, February.
    6. Bartik, Timothy J, 1987. "The Estimation of Demand Parameters in Hedonic Price Models," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 81-88, February.
    7. 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..
    8. repec:dau:papers:123456789/6486 is not listed on IDEAS
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