Hedonic Models and Market Segmentation

Steven Bourassa, Martijn Dröes and Martin Hoesli

No 21-62, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: This paper explores the pricing of heterogeneous goods in the presence of market segmentation. We use housing as an example. We extend the theoretical hedonic model of Rosen (1974) and show that, in the presence of market segmentation, the hedonic price line is no longer continuous or unique. Using American Housing Survey data for the Miami and Louisville metropolitan areas and a finite mixture estimation approach, we find distinct market segments based on ethnicity, race, and income.

Keywords: market segmentation; product differentiation; hedonic model; finite mixture model. (search for similar items in EconPapers)
JEL-codes: E02 O18 R31 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2021-09
New Economics Papers: this item is included in nep-cwa, nep-isf, nep-mac and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2162

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