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The median voter and the median consumer: Local private goods and population composition

Listed author(s):
  • Waldfogel, Joel

When a product's product provision entails fixed costs, it will be made available only if a sufficient number of people want it. Some products are produced and consumed locally, so that provision requires not only a large group favoring the product but a large number nearby. Just as local governments provide public goods appealing to individuals sharing the median voter's preferences for local public goods, product markets may provide an analogous benefit to individuals sharing living communities whose consumers tend to share his preferences in private goods. Using zip code level data on chain restaurants and restaurants overall, this paper documents how the mix of locally available restaurants responds to the local mix of consumers, with three findings. First, based on survey data on chain restaurant patronage, restaurant preferences differ substantially by race and education. Second, there is a strong relationship between restaurants and population at the zip code level, suggesting that restaurants' geographic markets are small. Finally, the mix of locally available chain restaurants is sensitive to the zip code demographic mix by race and by education. Hence, differentiated product markets provide a benefit--proximity to preferred restaurants--to persons in geographic markets whose customers tend to share their preferences.

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

Volume (Year): 63 (2008)
Issue (Month): 2 (March)
Pages: 567-582

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Handle: RePEc:eee:juecon:v:63:y:2008:i:2:p:567-582
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

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  1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
  2. Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Oxford University Press, vol. 43(2), pages 217-235.
  3. Sinai, Todd & Waldfogel, Joel, 2004. "Geography and the Internet: is the Internet a substitute or a complement for cities?," Journal of Urban Economics, Elsevier, vol. 56(1), pages 1-24, July.
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  8. Gyourko, Joseph & Tracy, Joseph, 1991. "The Structure of Local Public Finance and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 774-806, August.
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  10. Steven Berry & Joel Waldfogel, 2003. "Product Quality and Market Size," NBER Working Papers 9675, National Bureau of Economic Research, Inc.
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  14. David M. Cutler & Edward L. Glaeser, 1997. "Are Ghettos Good or Bad?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 827-872.
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