Hedonism vs. Hihilism: No Arbitrage and Tests of Urban Economic Models
Marcus Berliant () and
Daniel McMillen ()
No 1166, Working Papers from California Institute of Technology, Division of the Humanities and Social Sciences
We present two notions of "no arbitrage" in urban economic models and show that there is no model satisfying both. The standard hedonic housing model of urban economics and its generalizations are consistent with the first of these, but inconsistent with the second. We present a model consistent with the second notion of "no arbitrage" and a continuum of models consistent with neither notion that are observationally equivalent to the standard model, even if the utility function of consumers is known. They generate the same equilibrium allocations and values of bundles purchased in equilibrium, but the equilibrium price functions differ on bundles not purchased in equilibrium. Only one of these is the standard model. Thus, the available tests of the standard model cannot provide much evidence of its validity.
Keywords: monocentic city; hedonic models; no arbitrage (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo
References: Add references at CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 404 Not Found
Journal Article: Hedonism vs. nihilism: No arbitrage and tests of urban economic models (2006)
Working Paper: Hedonism vs. Nihilism: No Arbitrage and Tests of Urban Economic Models (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:clt:sswopa:1166
Ordering information: This working paper can be ordered from
Working Paper Assistant, Division of the Humanities and Social Sciences, 228-77, Caltech, Pasadena CA 91125
Access Statistics for this paper
More papers in Working Papers from California Institute of Technology, Division of the Humanities and Social Sciences Working Paper Assistant, Division of the Humanities and Social Sciences, 228-77, Caltech, Pasadena CA 91125.
Series data maintained by Victoria Mason ().