Revisiting the hedonic price method in the presence of market segmentation
M Baudry, M Maslianskaia-Pautrel - Environmental Economics and Policy …, 2016 - Springer
M Baudry, M Maslianskaia-Pautrel
Environmental Economics and Policy Studies, 2016•SpringerThe article presents a theoretical analysis of the role of groupwise heterogeneity in the
formation of hedonic prices. We show that in this case, submarkets emerge from market
equilibrium. The existence of submarkets means that the hedonic price function is
continuous, but the implicit price of characteristics is discontinuous at endogenous threshold
values separating submarkets. Based on numerical simulations, the article highlights the
way the groupwise heterogeneity could bias the estimation of the implicit price of …
formation of hedonic prices. We show that in this case, submarkets emerge from market
equilibrium. The existence of submarkets means that the hedonic price function is
continuous, but the implicit price of characteristics is discontinuous at endogenous threshold
values separating submarkets. Based on numerical simulations, the article highlights the
way the groupwise heterogeneity could bias the estimation of the implicit price of …
Abstract
The article presents a theoretical analysis of the role of groupwise heterogeneity in the formation of hedonic prices. We show that in this case, submarkets emerge from market equilibrium. The existence of submarkets means that the hedonic price function is continuous, but the implicit price of characteristics is discontinuous at endogenous threshold values separating submarkets. Based on numerical simulations, the article highlights the way the groupwise heterogeneity could bias the estimation of the implicit price of environmental quality.
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