estimating willingness to pay for housing characteristics an application of the ellickson bid rent model abstract the purpose of this paper is to estimate willingness to pay for housing characteristics using the discrete choice bid rent framework developed by b ellickson j urban econom 9 56 79 1981 and modified by s r lerman and c r kern j urban econom 13 358 363 1983 the paper provides an initial empirical test of the lerman and kern modifications using household level data from bogota colombia the results of the model are evaluated by comparing forecasted bid rents to actual rents and forecasted dwelling occupants to actual occupants by examining the demand prices which emerge from the analysis and by comparing the results to previous housing demand research which uses a hedonic type approach to analyze identical data the findings of the study show that the bid rent model works reasonably well in its predictions and in its estimates of the demand for attributes and in some ways it may perform better than a hedonic type model in forecasting the demand for housing attributes

a model of rental housing choices in the korean market the main purpose of this study is to propose and estimate a model of korean rental housing choice using hierarchical logit analysis the study focuses on the examination of how households choose their dwelling units in a complex rental housing market the decision is viewed as a partial sequence process beginning with the choice of rental housing tenure and finishing with a decision on the type of occupation to examine an additional step in the urban spatial structure hedonic price technique is incorporated into a hierarchical logit model in addition the separate effects of permanent and transitory components of measured income are examined through the instrumental variables method based on human capital theory it is shown that the proposed model provides a potentially more useful method than another model the multinomial logit in analysing the korean rental housing market

meta analysis in model implementation choice sets and the valuation of air quality improvements this research illustrates how the methods developed for meta analysis can serve to document and summarize voluminous information derived from repeated sensitivity analyses our application is to the sensitivity of welfare estimates derived from discrete choice models to assumptions about the choice set these assumptions affect welfare estimates through both the estimated parameters of the model and conditional on the parameters the substitution among alternatives in our specific application the evaluation is in terms of estimated benefits of air quality improvements in los angeles based on discrete choices of neighborhood and housing copyright 2007 john wiley sons ltd

do switching costs make markets less competitive abstract the conventional wisdom in economic theory holds that switching costs make markets less competitive this article challenges this claim the authors formulate an empirically realistic model of dynamic price competition that allows for differentiated products and imperfect lock in they calibrate this model with data from frequently purchased packaged goods markets these data are ideal in the sense that they have the necessary variation to identify switching costs separately from consumer heterogeneity equally important consumers exhibit inertia in their brand choices a form of psychological switching cost this makes the results applicable to the broad range of products that are distinctly identified i e branded rather than just to products for which there is a product adoption cost or explicit switching fee in the simulations prices are as much as 18 lower with than without switching costs more important equilibrium prices do not increase even in the presence of switching costs that

decentralization trends of employment location and spatial policies in ldc cities rapid urbanization in developing countries has produced a heavy concentration of population and economic activity in a very few large urban centers this pattern of urban concentration has generated two major policy concerns i keeping the largest cities in these countries from getting too large and ii maintaining regional equity this paper reports the empirical findings from the bogota city study and draws some policy conclusions in the context of korean spatial policy experience it documents the observed decentralization trends of employment in bogota and cali using several sets of household survey data and the colombian social security data then it summarizes the theoretical and empirical framework developed for the location choice of manufacturing firms drawing on these behavioral underpinnings of the firm s location choice the paper evaluates several policy issues related to employment decentralization based on the policies implemented in the seoul region

when do switching costs make markets more or less competitive abstract in a two period duopoly setting in which switching costs are the only reason why products may be perceived as differentiated we provide necessary and sufficient conditions for switching costs to lead to higher prices in the first period as well as to higher overall profitability we show that this happens if and only if switching costs are not too large we present the only treatment up to date of how switching costs and only switching costs affect competition based on the assumption that switching costs differ across consumers which allows us to illustrate the undesired byproduct of assuming that products exhibit substantial horizontal differentiation not only do we draw implications for the classical literature on competition with switching costs but also for the more recent one that rests upon such an assumption too

separability partial demand systems and consumer s surplus measures abstract in practice complete demand systems are not estimated rather either an incomplete demand system is estimated or separability is invoked and a partial demand system is estimated this paper considers the relationship between the conventional compensating variation equivalent variation and the corresponding welfare measure that can be derived from a partial demand system and the current budget allocation to the separable group even assuming the separability assumption invoked is appropriate these partial measures provide in general only a limited amount of information about the compensating variation and no information about the equivalent variation great care is therefore needed when using partial welfare measures to evaluate policy

a model of intraurban employment location an application to bogota colombia this report which examines the location behaviour of manufacturing firms in urban areas is part of a world bank urban study project a theoretical model of employment location is formulated and extended to an empirical specification in the multinomial logit framework a bid rent function is derived from the profit function and captures the firms locational equilibrium situations survey data from bogota colombia provides information on i attributes of the establishment such as plant space and ii attributes of the plant site such as access to markets the estimated model is capable of predicting the location choices of different types of firms separate regression results using the same data set indicate a strong relationship between the intensity of input use and land price supporting the hypothesis that the firms respond to the substitutability of land with respect to other inputs over space the patterns of employment location in bogota are by no means random they are quite similar to those observed for large cities in the united states

welfare measurement for environmental improvements using the hedonic model the case of nonparametric marginal prices abstract research in environmental and natural resource economics frequently requires the use of hedonic models because of the differentiated products involved this is true for studies of the relationship between environmental quality and property values or wages or between the characteristics of a recreation site and the demand for its services an obvious use of such studies is in estimating willingness to pay for improvements with differentiated products there are usually nonlinear hedonic price schedules and thus nonlinear budget constraints this makes welfare analysis difficult because standard duality results no longer hold this paper develops a technique for estimating a psuedo demand system that can be used to derive exact measures of consumer welfare change similar techniques are developed for producers with a psuedo profit function that can be converted to an exact measure of the change in quasi rents or rents the paper also shows that the distance function can be used to develop an ex ante measure of welfare change

hedonic theory bid rents and willingness to pay some extensions of ellickson s results abstract an alternative to ellickson s multinomial logit model of household bids for dwelling units is derived by making use of observable information on the price paid by the winning bidder the alternative specification makes it possible to estimate willingness to pay for housing attributes which cannot be obtained from ellickson s model some methodological issues arising from ellickson s method of grouping households are also examined

accounting for central neighborhood change 1980 2010 abstract after 1980 2000 population decline and economic stagnation downtown neighborhoods in most large us cities experienced 2000 2010 population growth and gentrification stark racial differences in valuations of downtown amenities and suburban labor market opportunities among those with less than college that only emerged after 2000 are the primary drivers of these downtown neighborhood dynamics as college educated whites moved in increases in valuations of downtown amenities encouraged other whites to remain in downtowns a reversal from prior decades continued departures of less than college educated minorities were driven both by relative improvements in suburban employment opportunities for this group and their continued declines in valuations of downtown amenities our evidence highlights the importance of racial differences in valuations of potentially endogenous local amenities for understanding recent downtown gentrification

beyond implicit prices recovering theoretically consistent and transferable values for noise avoidance from a hedonic property price model using a two stage hedonic pricing methodology we estimate a system of structural demand equations for different sources of transport related noise in the first stage we identify market segments using model based clustering techniques and estimate separate hedonic price functions hpfs for each segment in so doing we show how a semiparametric spatial smoothing estimator outperforms other standard specifications of the hpf in the second stage we control for non linearity of the budget constraint and identify demand relationships using techniques that account for problems of endogeneity and censoring of the dependent variable our estimated demand functions provide welfare estimates for peace and quiet that we believe to be the first derived from property market data in a theoretically consistent manner

divergence in alternative hicksian welfare measures the case of revealed preference for public amenities this paper investigates the divergence between the two hicksian welfare measures of non traded amenity improvement associated with housing first the hicksian surplus measures for amenity changes are analytically developed based on explicit specification of utility structures a hedonic two stage approach is then applied to empirically show that for quantity changes in contrast to hypothetical markets divergence in real market is small the paper also analytically develops expressions for the income and substitution effects and empirically shows that for a given income effect the greater the substitution effect the smaller the divergence between the two measures copyright 2002 john wiley sons ltd

the value of switching costs we study a dynamic model with an incumbent monopolist and entry in every subsequent period we first show that if all consumers have the same switching cost then the intertemporal profits of the incumbent are the same as if there was only one period we then study the consequences of heterogeneity of switching costs we prove that even low switching cost customers have value for the incumbent when there are more of them its profits increase as their presence hinders entrants who find it more costly to attract high switching cost customers

estimation of the bid rent function with the usage decision model abstract this paper examines whether the bid rent function model is a valid description of a mechanism of the urban land market we estimate the function that decides land usage and price using the full information maximum likelihood fiml it finds that land usage on average follows the rule that is consistent with the bid rent function model whichever usage outbids the others occupies the land however the evidence also suggests that there is a systematic departure from the model namely the distance from the second city center may directly affect land usage even though it is not reflected in land prices

bidding models of housing markets abstract the bid rent model which is the standard bidding model of housing markets fails to take account of three important characteristics of the bidding process that operates in these markets the prices of houses are established through sequential bidding so that sellers do not necessarily accept the highest bids that might be made for their houses ignorance of the market may lead potential buyers to make bids that are either higher or lower than the ones they would make if they had complete information and the distribution of bids for a house is truncated at the seller s asking price this paper describes a bidding model that incorporates these characteristics of housing markets the new model and the standard model are estimated econometrically and tested against one another using data from the baltimore maryland area the test results indicate strong rejection of the standard model it is concluded that the new model provides a better description of the operation of housing markets than does the standard model

the estimation of demand parameters in hedonic price models this paper shows that the econometric problem of estimating hedonic demand parameters is not a standard identification problem caused by demand supply interaction as has been often assumed estimation procedures based on this assumption lead to biased results the hedonic estimation problem is instead caused by the endogeneity of both prices and quantities when households face a nonlinear budget constraint an instrumental variables solution to this problem is suggested using instruments that exogenously shift the budget constraint

the demand for residence site characteristics the analysis of residential site choice is the primary concern in urban economics research on this problem is deficient in that rigorous theoretical models concentrate almost exclusively on access to the central business district cbd in this decision process while empirical models have been specified in a manner that is inconsistent with standard demand theory although these models possess the power of simplicity they are unable to explain the non monotonic location patterns which characterize urban areas without resorting to ad hoc theorizing this article develops and tests a model which is consistent with demand theory and is also capable of explaining non monotonic location patterns the hedonic rent function is seen as an intermediate step in the analysis of location which allows one to construct the complete data matrix necessary for the estimation of a set of demand functions for location specific traits the analytical importance of the functional form of this hedonic function is briefly noted finally the empirical analysis notes the importance of children in determining residential preferences with special attention being directed to the endogeneity of children with respect to the process of residential choice the traditional location model is generally tested by regressing some transformation of the annual rental payments or alternatively property value r on access or lack of access to the city center acc a vector of other locational traits z income i and a race variable mc

modelling the choice of tenure and building type a multinomial logistic mnl model and a naive nested logistic model are estimated to relate differences in household size age income and housing prices to differences in the choice of tenure and building type the estimated models show that the demand for lower density options decreases with a reduction in household size and increases with increasing age and real income higher rents increase the demand for owner occupied single family detached houses higher price levels for the ownership option shift demand toward all of the higher density options particularly toward high rise rental apartments the key assumption underlying the mnl model is examined and shown to not hold true however the differences in the predictions made by the two models are too small to matter in the study of the choices among the major building types issues regarding the choice of models are discussed in the conclusions

multi period competition with switching costs an overlapping generations formulation i examine an infinite period duoply market with positive consumer switching costs and overlapping generations of consumers when consumers have a finite time horizon then unlike beggs and klemperer 1992 the two firms may alternate dominance from one period to the next alternately charging high and low prices this agrees with the intuition that firms with a high locked in market share may set price so as to exploit that market share which causes a subsequent low market share among the new cohort of buyers leading to lower prices etc jel codes l13 d21 d43 d92

policy review section in this policy review section gerry stoker of the institute of local government studies presents a critical review of the role of urban development corporations udcs in comparing the experience of the udcs consideration is given to the varying nature of the land and property market in each udc area to the relationship with local authorities and other local bodies and the regeneration strategies pursued by the udcs this is followed by an assessment of the impact of the udcs in economic social and political terms in the second article john britton of the university of toronto examines the theoretical case for interventionist public policies to assist the innovation process in small and medium sized enterprises these arguments are supported by a review of the experience of various national support programmes introduced in the uk in particular the manufacturing advisory service introduced in 1978 and the design advisory service launched in 1982

the contribution of environmental amenities to low income housing a comparative study of bangkok and jakarta central and local governments and their creditors are increasingly interested in cost recovery for public services these strategies have two aims increasing revenues and making a better connection between benefits received and consumer bills this paper estimates a hedonic model for household level data in a rare contrast of slums in two asian mega cities to provide comparative information about how the poor value environmental amenities and basic infrastructure access the results suggest that slum housing prices do reflect differentials in public service access and that rough estimates of the value of access can be cheaply and usefully obtained for planning purposes

regional innovation policies compared regional policy and technology policy increasingly converge into regional innovation policies in the europe of regions the comparison of technology transfer networks in the german regions baden wu

on the choice of funtional form for hedonic price functions this study examines how errors in measuring marginal attribute pric es vary with the form of the hedonic price function in simulations consumers with known utility functions bid for houses with given attributes various forms of the hedonic function are estimated using equilibrium housing prices errors in estimating marginal attribute prices are calculated by comparing each consumer s equilibrium marginal bid vector with the gradient of the hedonic function when all attributes are observed linear and quadratic box cox forms produce lowest mean percentage errors however when some attributes are unobserved or are replaced by proxies linear and linear box cox functions perform best copyright 1988 by mit press

firms governments and innovation in the chukyo region of japan the study of innovation mechanisms in one of japan s major industrial regions chukyo based around nagoya is explored using a four part model this identifies the role of core assembly firms and their sub contractors national and local government agencies local chambers of commerce and private sector lobby groups the chukyo region innovation system cris was found to exhibit long term stability and appears to have weathered the economic challenges of the late 1980s and early 1990s the chukyo region s emphasis on continuous upgrading and kaizen has given it particular competitive advantages in downstream innovation activities however it now faces the challenge of moving further upstream into areas of basic research

revisiting dynamic duopoly with consumer switching costs abstract the degree of collusiveness of a market with consumer switching costs is analyzed in an infinite horizon model of duopolistic competition in contrast with previous analyses we assume that firms compete for the demand for a homogeneous good by setting prices simultaneously in each period this problem is formulated as a simple stochastic game and a symmetric stationary markovian perfect equilibrium with distinctive economic features is studied we show that switching costs unambiguously relax price competition in equilibrium but that on the contrary they may make tacit collusion more difficult to sustain journal of economic literature classification numbers c73 d43 l13

an alternative test of the hedonic theory of housing markets abstract in this paper the hedonic theory of housing markets is used to generate a multinomial logit model of household behavior in an urban housing market application of hedonic theory to housing markets is by now fairly familiar and a link to multinomial logit has also been established however by emphasizing more heavily the bid price interpretation of hedonic theory this paper develops a new connection to econometric estimation that essentially involves running the usual logit equations in reverse one advantage of this approach is that the link between the logit equations and hedonic theory involves bid price rather than utility functions and this in turn permits the empirical results to be given an extremely clear interpretation furthermore in contrast to the standard logit model the extreme value distribution required to justify the estimation technique emerges endogenously as part of the analysis

an efficiency approach to choice set formation theory and application to recreational destination choice an unresolved debate in behavioural choice research surrounds specifying individual choice sets to overcome the limitations of deterministic and probabilistic approaches in a framework consistent with individual optimizing behaviour this study develops an efficient frontiers approach to the choice set problem in the context of revealed preference destination choice stochastic frontier models relating costly inputs to utility generating outputs are estimated to measure the efficiency of sites choice sets are then formed by retaining sites that exceed alternative efficiency thresholds choice set composition site choice efficiency and probability of selection and consumer surplus are evaluated in the case of fishery site choice in maine

path renewal in old industrial regions possibilities and limitations for regional innovation policy coenen l moodysson j and martin h path renewal in old industrial regions possibilities and limitations for regional innovation policy regional studies this paper analyses the potential barriers and limitations for regional innovation policy to facilitate industrial renewal in old industrial regions it draws on a case analysis of the policy programme biorefinery of the future geared to promote renewal of the forest industry in northern sweden it is shown that infusion of radical emergent technology is necessary for new regional path development but not sufficient to avoid a singular focus on technology push policy should pay more attention to complementary experimentation processes in relation to demand side characteristics firm strategies and business models as well as regulatory aspects moreover coordination between regional innovation policy and adjacent domains and levels of policy making is needed as some of the most pressing obstacles for renewal are not specific to the region but i

a limiting joint choice model for discrete and continuous housing characteristics a simultaneous discrete and continuous random utility model for housing demand is presented household utility depends on three characteristics of hou sing a discrete number of bedrooms and continuous measures of hous i ng quality and distance to the central business district empirical r esults for a sample of renter households from san francisco are compa red for a univariate structure in which each choice variable has its own utility or disutility function a simultaneous structure assuming a discrete continuous analog of the independence of irrelevant alter natives and one for which this assumption is relaxed the results in dicate that the third structure is most appropriate copyright 1988 by mit press

the impact of site characteristics on housing cost estimates abstract hedonic housing regressions using micro data for owners and renters from the 1972 1973 consumer expenditure survey are presented by including tract characteristics and public goods in these regressions evidence is presented which indicates sensitivity of the physical housing variable coefficients to the choice of included site related characteristics furthermore omission of public good variables can result in misleading and possibly perverse coefficients on access intermetropolitan housing cost estimates however are shown to be relatively insensitive to the choice of site related characteristics

combining revealed and stated data to examine housing decisions using discrete choice analysis abstract this paper uses stated preference and revealed preference data separately and jointly to examine individuals housing choices in particular it combines an established revealed preference approach discrete choice analysis of actual housing purchases and a relatively new stated preference approach choice based conjoint analysis of hypothetical housing purchases to provide us with a better understanding of the factors driving housing decisions these methods are appropriately combined since they reflect the same decision process households select the dwelling that provides the best combination of attributes from the feasible set of alternatives in total this paper analyzes three data sets only actual housing purchases only hypothetical housing purchases and both types of purchases combined analysis finds that actual and hypothetical housing purchases are similar decision processes with respect to some attributes yet are dissimilar with respect to other attributes nevertheless combining the two types of data improves identification of both categories of attributes journal of economic literature classification number r21

state dependence and alternative explanations for consumer inertia for many consumer packaged goods products researchers have documented inertia in brand choice a form of persistence whereby consumers have a higher probability of choosing a product that they have purchased in the past using data on margarine and refrigerated orange juice purchases we show that the finding of inertia is robust to flexible controls for preference heterogeneity and not due to autocorrelated taste shocks thus the inertia is at least partly due to structural not spurious state dependence we explore three economic explanations for the observed structural state dependence preference changes due to past purchases or consumption experiences which induce a form of loyalty search and learning our data are consistent with loyalty but not with search or learning properly distinguishing among the dierent sources of inertia is important for policy analysis because the alternative sources of inertia imply qualitative dierences in firm s pricing incentives and lead to quantitatively dierent equilibrium

valuing product attributes using single market data a comparison of hedonic and discrete choice approaches this paper compares via simulation the perfor mance of the multinomial logit and hedonic models in esti mating consumer preferences for product attributes we as cribe preferences over the attributes of houses to a population of consumers and by having them bid for a set of houses calculate equilibrium prices the resulting data are used to estimate the two models we find that the gradient of a linear box cox hedonic price function estimates marginal attribute bids at least as well as a linear logit model although the difference between the two is small when some variables are not observed or are replaced by proxies the logit model however outperforms the he donic model in valuing non marginal attribute changes this is true when the researcher knows the true form of consumers utility functions and when the utility function must be approx irnated

demographic variables in demand analysis in this paper the authors discuss five procedures for incorporating demographic variables into theoretically plausible demand systems translating scaling and the gorman reverse gorman and implicit prais houthakker procedures these five procedures are used to incorporate a single demographic variable the number of children in a household into the generalized ces demand system using household budget data for the united kingdom for the period 1966 1972 excerpt

estimating the demand for the characteristics of housing a hstract estimates of the demand for the characteristics contained in a differentiated product such as housing can be based on hedonic regressions however previous studies have not dealt with several potential problems in such estimation a more appropriate framework for the estimation is provided in this paper also data from a number of cities are used to eliminate the identification problem and the endogeneity of the marginal prices derived from non linear hedonic equations is considered in the estimation the results on own and cross price elasticities expenditure elasticities and the effects of socio economic vafiables accord well with expectations

quasi experiments hedonic models and estimating trade offs for local amenities this paper evaluates whether the property value capitalization effects measured with quasi experimental methods offer reliable estimates of willingness to pay for changes in amenities we propose the use of a market simulation as a robustness check two applications establish the method s relevance the first examines the conversion of land cover from desert to wet landscape the second examines cleanup of hazardous waste sites we find that even when quasi experimental methods have access to ideal instruments their performance in measuring general equilibrium willingness to pay cannot be assumed ideal it needs to be evaluated considering the specific features of each application jel q51

valuing air quality with hedonic and discrete choice models environmental economists have been using property values in attempts to measure the value residents place on air quality as far back as the 1960s however in the years since then we have learned a great deal about how complex valuing nonmarginal changes in air quality is rosen presented a hedonic model that is still extremely influential today but the estimation strategy he outlined in that paper had some shortcomings many of these identification and endogeneity issues were corrected subsequently in papers such as palmquist 1984 parsons and bartik but none of these papers concentrated on environmental issues a central issue in estimating the demand or marginal willingness to pay functions for characteristics of housing is the identification of those behavioral functions as distinct from

modeling heterogeneity and state dependence in consumer choice behavior in frequently purchased consumer goods markets consumer brand choices exhibit substantial persistence across purchase occasions in this article i estimate a choice model that admits of both heterogeneity in preferences and true state dependence as sources of this persistence using nielsen scanner data on ketchup i find evidence for true state dependence in the choice process even after controlling for a rich heterogeneity structure simulation of the model indicates that the long term effect of a promotion induced purchase on future purchase probabilities is positive but small

simultaneity in the market for housing characteristics abstract the nature of simultaneity in the markets for housing characteristics is examined simultaneity is found to arise in the implicit markets for individual characteristics because of the presence of nonlinearity in the market hedonic price function for housing however this simultaneity is not the kind discussed by s rosen j political econ 82 34 55 1974 between firm supplies and household demands as a result the rosen suggestion of identifying demand with firm supply shifters is inappropriate among the alternative approaches to identification the most desirable involve use of data over two or more markets in which residence for a given household is exogenous to the choice of housing

neighbourhood effects and housing demand in this paper we estimate a model of housing demand with neighborhood eects we exploit special features of the national sample of the american housing survey and properties of housing markets that allow us to create natural instruments and therefore identify the impact of social interactions we find evidence of both endogenous and contextual neighborhood eects we report two alternative sets of estimates for neighborhood eects that dier in terms of the instruments we use for estimating the model when the endogenous neighborhood eect is large the respective contextual eects are weak and vice versa the elasticity of housing demand with respect to the mean of the neighbors housing demands the endogenous eect ranges from 0 19 to 0 66 and is generally very significant the contextual eects are also very significant a key such eect the elasticity with respect to the mean of neighbors permanent incomes ranges from 0 17 to 0 54

hedonic prices demands for urban housing amenities and benefit estimates abstract this paper uses a rosen two step hedonic price trait demand approach to estimate demand functions for a vector of urban amenities to ascertain whether this theoretically preferred approach yields benefit estimates which differ from the oft used ridker henning one step hedonic approach we conduct a sensitivity analysis we find that the two step approach does yield different benefit estimates and that the differences are large for some amenities the estimates are sensitive to the functional form of the hedonic equation when the forms are significantly different according to modified box cox results but are not particularly sensitive to specification of the amenity demand equation

multiple regime bid rent function estimation abstract this paper reviews estimators for multiple regime selection models which include the standard urban bid rent model as a special case 4 probabilistic bid rent model imposes a restrictive selection process while existing two stage multiple regime estimators assume an error structure that is inconsistent with bid rent theory monte carlo experiments demonstrate that two stage estimators are accurate and robust to distributional misspecification the practical usefulness of the estimators is illustrated using data on 1920s chicago land values

the determinants of nonresidential urban land values abstract this paper presents the results of an empirical study of nonresidential urban land values in the dallas metropolitan area the data base consists of 467 vacant land transactions from 1978 to 1982 by concentrating on sales prices of vacant land rather than improved property problems normally encountered from use of appraised values or improved properties are eliminated separate models are developed for industrial commercial and office land the study focuses on the tendency toward agglomeration for consumers of each land use as measured by the impact on land values in the central business district suburban nodes and other employment concentrations the results provide insight into a number of influences on urban land value and offer evidence that office land derives greater benefit from agglomeration than does commercial or industrial land

a comment on revisiting dynamic duopoly with consumer switching costs a comment on revisiting dynamic duopoly with consumer switching costs eric t anderson nanda kumar and surendra rajiv kellogg school of management northwestern university 2001 sheridan road evanston il 60208 usa school of management university of texas at dallas p o box 830688 richardson tx 75083 0688 usa nus business school national university of singapore biz 1 04 20 1 business link singapore 117592

an almost ideal demand system for housing attributes in recent articles mendelsohn 16 and palmquist 20 use restricted versions of rosen s 22 model of household behavior to consistently estimate demand functions for attributes of a differentiated product rosen s 22 model is of a single market for such a product and he proposes a two step technique to estimate attribute demand functions first a single hedonic price function is estimated for the differentiated product attribute prices are the first derivatives of the fitted hedonic price function with respect to the relevant attributes second demand functions for attributes are estimated using the prices imputed in the first step if the hedonic price function estimated in the first step is linear then there is no price variation for attributes and demand functions cannot be estimated if the hedonic price function is nonlinear then there is price variation but it is endogenous to households since in a single market price and attribute quantity are chosen jointly 2 indeed within market price variation will always be endogenous in either case without sufficient restriction on the model the parameters of the demand functions for attributes cannot be consistently estimated using rosen s 22 method 3 mendelsohn 16 and palmquist 20 assume that there are many markets for the differentiated product and that households with like preferences may be observed in the different markets by this restriction households face price variation across markets that is exogenous whether hedonic price functions are linear or nonlinear if so demand functions can be consistently estimated 4

measuring consumer switching costs in the television industry in this article i develop and estimate a model of dynamic consumer behavior with switching costs in the market for paid television services i estimate the parameters of the structural model using data on cable and satellite systems across local us television markets over the period 1992 2006 the results suggest switching costs range from 159 to 242 for cable and from 212 to 276 for satellite providers in 1997 dollars using a simple dynamic model of cable providers i demonstrate that switching costs of these magnitudes can significantly affect the firms optimal strategies

is land leasing a solution to unaffordable housing the increase in u s mortgage rates from nine per cent in 1976 to fifteen per cent in 1982 raised monthly mortgage payments by about sixty per cent even before rising house prices in the united states over this period are taken into account not surprisingly attention has been focused on ways and means of counteracting spiralling housing costs one proposed solution is land leasing under such an arrangement the homebuyer purchases the house but leases the land there may be an option to buy the land at some time in the future land leasing reduces the overall purchase price and hence lowers the minimum down payment and the initial monthly mortgage payment in hawaii land leasing has been a readily available alternative to land owning throughout the postwar period the analysis of residential housing prices in hawaii provides some quantitative estimates of the relative prices of leasehold versus fee simple properties the average price differential is surprisingly small one explanation of these small price differentials for which a model is developed and tested here is that borrowing constrained households use high discount rates to calculate the present value of the future land price that they will in effect have to pay at the expiration of the lease these discount rates are estimated in a nonlinear hedonic property price equation the results are then employed to answer the question under what conditions would a leaseholder buy the land outright before the expiration of the lease

capitalization population movement and the local public sector a probabilistic analysis abstract a probabilistic model is used to relate population movement to the capitalization of the local public sector into the price of housing this explanation is used to analyze the predicted effects of differing public policies on the composition of san francisco s population the model is also used to test the relative merits of the two explanations of the flight of higher income households from the central city the accessibility and flight from blight models the findings suggest that neither model can completely explain this flight exclusive of the other

an empirical investigation into the performance of ellickson s random bidding model with an application to air quality valuation abstract this paper compares ellickson s random bidding model to the standard hedonic model in estimating benefits due to marginal and non marginal changes in housing attributes using data on the chicago housing market the paper shows that the benefit estimates obtained using the two models are very close in addition various categorizations based on household characteristics are tested in the case of the random bidding model the study shows that the effect of categorization on the overall benefit estimates are negligible moreover the results from the random bidding model reveal that increased income leads to greater demand for environmental quality

land use worker heterogeneity and welfare benefits of public goods we show that investments in public goods change the optimal land use in their vicinity leading to additional welfare benefits this occurs through two sorting mechanisms first availability of public goods leads to higher population densities second population groups sort according to their preferences for public goods we develop a structural spatial general equilibrium model that accounts for these effects the model is estimated using data on transport infrastructure commuting behaviour land use and land rents for some 3000 zip codes in the netherlands and for three levels of education welfare benefits of investments in public transport infrastructure are shown to differ sharply by workers educational attainment welfare gains from changes in land use account for up to 30 of the total benefits of a transport investment

a quick and easy method for estimating switching costs abstract i develop and test a method for a quick and easy calculation of consumer switching costs among brands in a given industry the theory developed and tested here maps observed brands prices and market shares onto the switching costs which deter a consumer of a specific brand from switching to any other competing brand then i demonstrate how users switching costs can be directly calculated in two different industries a the israeli cellular phone market and b the finnish market for bank deposits this calculation method can be used to calculate switching costs in a wide variety of other industries such as airlines health services computers software telecommunications and more

discrete choice models and the housing price and travel to work elasticities of location demand abstract multinomial logit and nested logit models of mode choice in travel to work and housing location choice are estimated from 1970 u s census data aggregated to small zones of the chicago smsa the estimated models are then used to derive the housing rent travel time and travel cost elasticities of location demand the effects of sampling variation sample size attribute inclusion model specification and estimation method on the estimated elasticities are evaluated and found to be important the elasticities are also compared and found to agree with those obtained from other discrete choice models and in the case of housing rent with estimates obtained from models based on other theoretical structure

estimating the structural equations of implicit markets and household production functions whenever marginal prices are nonconstant as in most hedonic and household production function markets ordinary least squares estimates of the price elasticities of structural equations will be biased a two stage least squares estimation procedure is developed and applied to estimate hedonic and potentially household production function demand functions when price gradients are nonlinear

hedonic prices and implicit markets estimating demand and supply functions for differentiated products in choosing the level of quality to purchase the buyer of a differentiated product also chooses a point on the marginal price schedule for that product hence in general the demand functions for product characteristics cannot be consistently estimated by ordinary least squares market equilibrium results in a matching of characteristics of demanders and suppliers this matching restricts the use of buyer and seller characteristics as instruments when estimating demand and supply functions for product characteristics the paper develops these issues a stochastic structure for hedonic equilibrium models is then proposed identification results are presented and estimation procedures are outlined

market structure and the competitive effects of switching costs abstract we revisit the effects of switching costs on dynamic competition we consider stationary markovian strategies with market shares being the state variable and characterize a relatively simple markov perfect pricing equilibrium at which there is switching by some consumers at all times for the case of low switching costs and infinitely lived consumers we show that switching costs are pro competitive in the long run steady state while the overall effect in the short run transient state depends on market structure in particular switching costs are anti competitive in relatively concentrated markets and pro competitive otherwise

the streetcar and residential location in nineteenth century philadelphia the alonso muth model predicts how a worker s income affects his residential location within an urban area workers choose a residential location balancing the lower rent at locations distant from the city center against the higher commuting cost that such locations entail if the income elasticity of housing demand is greater than that of marginal commuting cost the bid rent function of a high wage worker is flatter than that of a low wage worker and thus the high wage worker lives farther from the city center this theory which was first articulated in the 1960s was consistent with empirical evidence from that period the model did not fare so well in the 1970s and 198os however on one hand were new studies of housing demand polinsky and ellwood 20 pointed out biases in earlier studies and found income elasticities less than unity when these biases were corrected these results indicate that the income elasticity of housing demand is less than that of marginal commuting cost since the latter is typically close to unity which in turn implies that the bid rent function of a high wage worker is steeper than that of a low wage worker wheaton 25 provided more direct evidence on this point he estimated bid rent functions of different income groups and found no significant difference between those of higher and lower income households these studies suggested that the alonso muth model could not explain the residential pattern observed in the 1950s and 1960s on the other hand was the change in that pattern in the 197os upper income households began to return to the cities the so called

joint choice of tenure and dwelling type a multinomial logit analysis for the city of chongju this paper explores the plausible variables that influence choices in the chongju housing market a joint model of tenure and dwelling type is estimated within the multinomial logit framework the