Hedonism vs. Nihilism: No Arbitrage and Tests of Urban Economic Models
We present two notions of “no arbitrage” in urban economic models and show that there is no model satisfying both. The standard hedonic housing model of urban economics and its generalizations are consistent with the first of these, but inconsistent with the second. We present a model consistent with the second notion of “no arbitrage” and a continuum of models consistent with neither notion that are observationally equivalent to the standard model, even if the utility function of consumers is known. Only one of these is the standard model. Thus, the available tests of the standard model cannot provide much evidence of its validity. Finally, we examine nonlinear price systems consistent with the second notion of "no arbitrage" and their welfare consequences.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Berliant, Marcus & Papageorgiou, Yorgos Y. & Wang, Ping, 1990. "On welfare theory and urban economics," Regional Science and Urban Economics, Elsevier, vol. 20(2), pages 245-261, September.
- Deacon, Robert T & Sonstelie, Jon, 1985. "Rationing by Waiting and the Value of Time: Results from a Natural Experiment," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 627-47, August.
- Fujita,Masahisa, 1989.
"Urban Economic Theory,"
Cambridge University Press, number 9780521346627, Junio.
- Bryan Ellickson & Birgit Grodal & Suzanne Scotchmer & William R. Zame, 1999.
"Clubs and the Market,"
99-04, University of Copenhagen. Department of Economics.
- McMillen, Daniel P., 1990. "Consistent estimation of the urban land value function," Journal of Urban Economics, Elsevier, vol. 27(3), pages 285-293, May.
- Kau, James B. & Sirmans, C. F., 1979. "Urban land value functions and the price elasticity of demand for housing," Journal of Urban Economics, Elsevier, vol. 6(1), pages 112-121, January.
- Mas-Colell, Andreu, 1975. "A model of equilibrium with differentiated commodities," Journal of Mathematical Economics, Elsevier, vol. 2(2), pages 263-295.
- Coulson, E., 1990.
"Really Useful Tests Of The Monocentric Model,"
1-90-5, Pennsylvania State - Department of Economics.
- McMillen, Daniel P., 2003. "The return of centralization to Chicago: using repeat sales to identify changes in house price distance gradients," Regional Science and Urban Economics, Elsevier, vol. 33(3), pages 287-304, May.
- Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
- Coulson, N. Edward, 1989. "The empirical content of the linearity-as-repackaging hypothesis," Journal of Urban Economics, Elsevier, vol. 25(3), pages 295-309, May.
- Scotchmer, Suzanne, 1986. "The short-run and long-run benefits of environmental improvement," Journal of Public Economics, Elsevier, vol. 30(1), pages 61-81, June.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpur:0407012. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.