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Discrete choice models with capacity constraints: An empirical analysis of the housing market of the greater Paris region

  • de Palma, Andre
  • Picard, Nathalie
  • Waddell, Paul

Discrete choice models are based on the idea that each user can choose both freely and independently from other users in a given set of alternatives. But this is not the case in several situations. In particular, limitations and interactions can occur when the number of available products of one type is smaller than the total demand for this type. As a consequence, some individuals can be denied their preferred choice. We develop a methodology to address those constraints and we apply it to residential location choice, where our empirical data suggest that availability constraints may bias actual choices. The analysis provides some theoretical developments and elaborates an iterative procedure for estimating demand in the presence of capacity constraints. The empirical application relies on the location choice model developed and estimated in [6] for Ile de France (Paris region) and generalizes it to integrate capacity constraints.

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

Volume (Year): 62 (2007)
Issue (Month): 2 (September)
Pages: 204-230

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Handle: RePEc:eee:juecon:v:62:y:2007:i:2:p:204-230
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

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  1. John M. Quigley, 1976. "Housing Demand in the Short Run: An Analysis of Polytomous Choice," NBER Chapters, in: Explorations in Economic Research, Volume 3, number 1, pages 76-102 National Bureau of Economic Research, Inc.
  2. Daniel McFadden, 1977. "Modelling the Choice of Residential Location," Cowles Foundation Discussion Papers 477, Cowles Foundation for Research in Economics, Yale University.
  3. A. de Palma & J. Rouwendal, 1996. "Availability constraints in the housing market," THEMA Working Papers 96-04, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  4. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  5. Jordan Louviere & Kenneth Train & Moshe Ben-Akiva & Chandra Bhat & David Brownstone & Trudy Cameron & Richard Carson & J. Deshazo & Denzil Fiebig & William Greene & David Hensher & Donald Waldman, 2005. "Recent Progress on Endogeneity in Choice Modeling," Marketing Letters, Springer, vol. 16(3), pages 255-265, December.
  6. de Palma, Andre & Motamedi, Kiarash & Picard, Nathalie & Waddell, Paul, 2005. "A model of residential location choice with endogenous housing prices and traffic for the Paris region," European Transport \ Trasporti Europei, ISTIEE, Institute for the Study of Transport within the European Economic Integration, issue 31, pages 67-82.
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