Hedonic Markets and Explicit Demands: Bid-Function Envelopes for Public Services, Neighborhood Amenities, and Commuting Costs

John Yinger

No 114, Center for Policy Research Working Papers from Center for Policy Research, Maxwell School, Syracuse University

Abstract: Hedonic regressions with house value as the dependent vaqriable are widely used to study the value of public services and amenities. This paper builds on the theory of household bidding and sorting to derive a bid function envelope, which provides a form for these regressions. This approach uses a general characterization of household heterogeneity, yields estimates of the price elasticities of demands for services and amenities directly from the hedonic with no need for a Rosen two-step procedure, and provides tests of key hypotheses about household sorting. An application to data from Cleveland in 2000 yields precise estimates of price elasticities for school quality, distance from environmental hazards, and neighborhood ethnic composition. The results support the sorting hypotheses and indicate that household preferences are very heterogeneous, with some households placing a negative value on many "amenities."

Keywords: Hedonics; capitalization; bidding; sorting (search for similar items in EconPapers)
JEL-codes: H73 R21 (search for similar items in EconPapers)
Pages: 71 pages
Date: 2009-03
New Economics Papers: this item is included in nep-agr and nep-ure
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:max:cprwps:114

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