A Pecuniary Reason for Income Mixing
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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|Date of creation:||01 Jan 1998|
|Date of revision:|
|Publication status:||Published in Journal of Urban Economics 1998,, pp. 158-169|
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