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A Pecuniary Reason for Income Mixing

  • Frankel, David M.

Empirical studies have found a high degree of income mixing in American neighborhoods. We give a new explanation of this phenomenon that is based on consumer search. A low price for a given good benefits high valuation buyers more than low valuation buyers. But with search, the probability of obtaining a low price is increasing in the proportion of low valuation buyers. This gives high valuation buyers an incentive to live near low valuation buyers. With many goods, a buyer has an incentive to live near neighbors whose valuations are uncorrelated with hers.

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Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 44 (1998)
Issue (Month): 1 (July)
Pages: 158-169

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Handle: RePEc:eee:juecon:v:44:y:1998:i:1:p:158-169
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

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