A Pecuniary Reason for Income Mixing

David Frankel

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: Empirical studies have found a high degree of income mixing in American neighborhoods. We give a new explanation of this phenomenon that is based on consumer search. A low price for a given good benefits high valuation buyers more than low valuation buyers. But with search, the probability of obtaining a low price is increasing in the proportion of low valuation buyers. This gives high valuation buyers an incentive to live near low valuation buyers. With many goods, a buyer has an incentive to live near neighbors whose valuations are uncorrelated with hers.

Date: 1998-01-01
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Published in Journal of Urban Economics 1998,, pp. 158-169

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Related works:
Journal Article: A Pecuniary Reason for Income Mixing (1998)
Working Paper: A Pecuniary Reason for Income Mixing (1995)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:11925

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