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Revealed preference for relative status: Evidence from the housing market

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  • Leguizamon, Susane J.
  • Ross, Justin M.

Abstract

This paper investigates the value individuals place on their relative housing consumption as compared to absolute housing consumption. Using observed housing sales from three Ohio MSAs in 2000, a spatial Durbin hedonic price model provides total marginal willingness-to-pay estimates for both characteristics of housing units and those of its neighbors. Using this revealed-preference approach, we find evidence suggesting individuals do value relative house size, but the absolute effect dominates. For instance, the estimates indicate that if all homes in Columbus were to increase in size by 100 square feet, the net effect of impacts on absolute and relative consumption would be to increase house prices by $605 on average. This stands in contrast to the stated preference literature, which frequently find individuals to be willing to forgo absolute well-being in exchange for relative status gains.

Suggested Citation

  • Leguizamon, Susane J. & Ross, Justin M., 2012. "Revealed preference for relative status: Evidence from the housing market," Journal of Housing Economics, Elsevier, vol. 21(1), pages 55-65.
  • Handle: RePEc:eee:jhouse:v:21:y:2012:i:1:p:55-65
    DOI: 10.1016/j.jhe.2012.01.001
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    Cited by:

    1. Seya, Hajime & Yamagata, Yoshiki & Tsutsumi, Morito, 2013. "Automatic selection of a spatial weight matrix in spatial econometrics: Application to a spatial hedonic approach," Regional Science and Urban Economics, Elsevier, vol. 43(3), pages 429-444.
    2. Joshua C. Hall, 2013. "Does School District and Municipality Border Congruence Matter? A Spatial Hedonic Approach," Working Papers 13-02, Department of Economics, West Virginia University.
    3. Brasington, David M., 2017. "School spending and new construction," Regional Science and Urban Economics, Elsevier, vol. 63(C), pages 76-84.
    4. Susane Leguizamon, 2010. "The Influence of Reference Group House Size on House Price," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(3), pages 507-527.
    5. Anupam Nanda & Jia-Huey Yeh, 2016. "Reflected Glory Versus Repulsive Envy: How Do the Smiths Feel About the House of the Joneses?," Asian Economic Journal, East Asian Economic Association, vol. 30(3), pages 317-341, September.

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