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Hedonic Models and Market Segmentation

Author

Listed:
  • Steven C. Bourassa

    (Florida Atlantic University)

  • Martijn Dröes

    (University of Amsterdam)

  • Martin Hoesli

    (University of Geneva - Geneva School of Economics and Management (GSEM); Swiss Finance Institute; University of Aberdeen - Business School)

Abstract

This paper explores the pricing of heterogeneous goods in the presence of market segmentation. We use housing as an example. We extend the theoretical hedonic model of Rosen (1974) and show that, in the presence of market segmentation, the hedonic price line is no longer continuous or unique. Using American Housing Survey data for the Miami and Louisville metropolitan areas and a finite mixture estimation approach, we find distinct market segments based on ethnicity, race, and income.

Suggested Citation

  • Steven C. Bourassa & Martijn Dröes & Martin Hoesli, 2021. "Hedonic Models and Market Segmentation," Swiss Finance Institute Research Paper Series 21-62, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2162
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    More about this item

    Keywords

    market segmentation; product differentiation; hedonic model; finite mixture model.;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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