Revisiting the hedonic price method in the presence of market segmentation

Marc Baudry and Masha Maslianskaia Pautrel ()
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Masha Maslianskaia Pautrel: GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - AGROCAMPUS OUEST - Institut National de l'Horticulture et du Paysage

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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.

Keywords: Discrete heterogeneity; Environmental valuation; Hedonic modeling; Vertical differentiation (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

Published in Environmental Economics and Policy Studies, 2016, 18, pp.527-555. ⟨10.1007/s10018-015-0122-5⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01392766

DOI: 10.1007/s10018-015-0122-5

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