Hedonic estimation of housing demand elasticity with a markup over marginal costs

We show that recent developments in hedonic pricing theory allow modeling of the equilibrium pricing function as the marginal cost of an additional housing unit plus a markup that varies inversely with the elasticity of demand. Useful information about demand elasticity at a given point on the envelope function can be recovered from the hedonic regression and limited information on marginal costs. In particular, the elasticity of the envelope with respect to any characteristic such as interior area provides information on the elasticity of demand. Relative price elasticities (i.e., elasticities that vary from a base value in a known way with interior area, unit type or neighborhood characteristics) can be computed from the elasticity of the hedonic envelope. Like Yinger (2010), our method is based on a single hedonic equation.We test our method using sales of new high rise condominiums in two districts within Shenzhen, China: Futian and Longgang. The results strongly confirm the main hypothesis of this paper: price elasticity with respect to size is increasing for more complex types of units. Together with estimates of marginal costs of production, these results imply that relative demand elasticity is declining for larger, more complex units.     

Permanent income,hedonic prices,and demand for housing: New evidence

Housing demand is examined by looking quite specifically at the income and price variables based on individual household data. Permanent and transitory incomes are computed through instrumental variables related to human and nonhuman wealth. A price is constructed by spatially varying hedonic techniques. Separation of measured income into permanent and transitory components substantially improves the predictive power of the housing demand estimation and leads to demand elasticities of +1 and ?1 with respect to permanent income and price. The permanent income elasticity is roughly twice the measured income elasticity.     

Estimating the Demand for Housing, Land, and Neighbourhood Characteristics

This paper provides estimates of the structure of demand for individual housing and neighbourhood characteristics and for land in two British cities. We estimate a hedonic price function, and from this obtain the implicit prices of house attributes. These prices are used to estimate a demand system for each city. These perform well, and enable us to calculate price and income elasticities for each of the non-dichotomous characteristics and for land. To counteract criticisms of demand estimates derived within the hedonic framework a method is developed for selecting an appropriate set of instrumental variables. Estimates derived from this method, however, differ only slightly from those obtained using the conventional techniques. Several features of these estimates provide insights into the unusual characteristics of the British housing market, the effects of constraints imposed by land use planning, and the effects of changing income distribution on the structure of demand.     

Valuation of ticket prices for first-division football matches in the Spanish league

This paper measures the optimal prices of football tickets and investigates the pricing strategy of the first-division teams in the Spanish league during the 2018/2019 season. The paper develops a dual hybrid model of supply and demand based on a hedonic price approach. Fans have multiple motivations to attend the stadium, such as the quality of the opposing teams, the pre-match qualifying position, the schedule, the day of the match, the stadium facilities, and the atmosphere. Their final decision will be conditioned by the price set by the clubs. The data show a difference of almost 300% in ticket prices among clubs. The estimation results from a hedonic price equation reveal that an optimal pricing strategy is followed by only five out of 20 clubs in the league. We also quantify the percentage of overvaluation or undervaluation of ticket prices.     

Illicit drug use among arrestees, prices and policy

Prior studies, by relying on nationally representative surveys, have overlooked the important fact that use of addictive substances is not uniformly distributed; subgroups of hardcore users account for most of the drug consumption. This study employs the Arrestee Drug Abuse Monitoring system to analyze the demand for cocaine and heroin by urban arrestees, employing objective indicators of use based on urinalysis. The data are repeated city cross sections, and panel data methodology is employed to account for endogeneity. Cocaine and heroin prices have a negative effect on the probability of use even among this group of heavy users. Results indicate that subjective, self-reported measures of participation are likely to be under-reported, which may impart bias to estimates of the price elasticity. The own-price cocaine participation elasticity is about −0.15, and the own-price heroin participation elasticity is about −0.10 for arrestees. This contemporaneous elasticity understates the full effect, and the long-run price elasticity is about twice the magnitude. The magnitude of the price response is substantially smaller relative to the estimates in the prior literature, and calculations suggest that further enforcement and interdiction-driven increases in drug prices may not be cost-effective.     

需求价格弹性和销售收入关系的数学探析

文章认为,许多经济学教材中关于需求价格弹性对销售收入影响的结论存在明显缺陷,通过严格的数学分析,无论如何都不能得出需求价格弹性大于1时,降价会使销售收入增加这样的结论。正确的结论应该是:对同一条需求曲线,对应不同的点有不同的弹性,中点的价格弹性为1,是销售收入最大点,销售收入的变化由销售点在需求曲线上的位置及移动方向共同决定。     

The Auction Price of Apartments in Moscow: Hedonic Estimation in Disequilibrium1

The purpose of this paper is to see how economic factors determine prices in the previously communist countries undergoing privatization. This does not concern the auctions of big state enterprises where the prices are found to be rigged. In this paper we estimate hedonic price functions based on a unique data set on auction prices of apartments in Moscow. We collected the data ourselves by attending the auctions and gathered data on the characteristics. We estimated the hedonic equations using a disequilibrium approach because no equilibrium prices were observed for large number of apartments that were withdrawn from the auction. We found that, as the privatization of residential housing was carried out, the hedonic price equations fit the data remarkably well.     

Hedonic prices, price indices and housing markets

This paper extends hedonic price analysis to the formation of housing price indices measuring variation within a metropolitan area. In forming these indices fifteen submarkets, heterogeneous across time and space, are described within a short-run equilibrium model. Linear functional forms are generally rejected using a method proposed by Box and Cox. Aggregation of hedonic price coefficients into standardized units yields significantly higher housing prices in the central city than in its suburbs, as well as differential effects of structural and neighborhood improvements among submarkets.     

Autoverkopen en autopark in Nederland, 1950–1970

Summary This is a study of the demand for the ownership of new or firsthand cars, i.e. the demand of ‘first owners’ who habitually buy new cars which are then traded in long before they are obsolescent. Upon combining the evidence of various surveys with time-series for 1950-64 it is found that this ownership has an income elasticity of 2 and a price elasticity of – 1.25 in respect of the constant-quality index of new car prices earlier provided. On the average new cars are traded in after three years so that roughly one third of the existing stock is replaced every year. These values together determine an equation for purchases of new cars which accurately predicts new registrations in 1965 and 1966. Projections for the years 1967-70 are provided. In the model employed the total number of cars (including used cars) is determined by the active demand exerted by ‘first owners’ on one hand and by the hitherto fairly constant scrappage rates on the other. Projections of the overall ownership rate can therefore be derived from the forecasts of new registrations. The ownership rate will approach 80% around 1970, and it is likely that at that stage the current scrappage rates will cease to apply in view of the greater predilection for comparatively younger cars.     

我国新建住宅长期供给价格弹性估算——基于35个大中城市的实证研究

大多数住宅模型和政策分析,都直接或间接依赖于住宅供给价格弹性的估计值：为了应对市场需求冲击,是多供给住房还是提高住宅价格？基于Mayo（1981）构建的模型,估算了我国35个主要大中型城市的新建住宅供给价格弹性。根据流量模型,2000-2007年我国的新建住宅价格弹性系数在4-11之间,2008到2013年的价格弹性在5-13之间。而存量调整模型得到了截然不同的估算结果：2008-2013年我国的新建住宅供给价格弹性在1-6之间,更精确的估算出了我国新建住宅供给市场的价格弹性。     

Autoverkopen en autopark in Nederland, 1950–1970

Summary  This is a study of the demand for the ownership of new or firsthand cars, i.e. the demand of 'first owners' who habitually buy new cars which are then traded in long before they are obsolescent. Upon combining the evidence of various surveys with time-series for 1950-64 it is found that this ownership has an income elasticity of 2 and a price elasticity of – 1.25 in respect of the constant-quality index of new car prices earlier provided. On the average new cars are traded in after three years so that roughly one third of the existing stock is replaced every year. These values together determine an equation for purchases of new cars which accurately predicts new registrations in 1965 and 1966. Projections for the years 1967-70 are provided.
In the model employed the total number of cars (including used cars) is determined by the active demand exerted by 'first owners' on one hand and by the hitherto fairly constant scrappage rates on the other. Projections of the overall ownership rate can therefore be derived from the forecasts of new registrations. The ownership rate will approach 80% around 1970, and it is likely that at that stage the current scrappage rates will cease to apply in view of the greater predilection for comparatively younger cars.     

Hedonic Price Models for Dynamic Markets*

The price of a product depends on its characteristics and will vary in dynamic markets. The model describes a processing firm that bids in an auction for a heterogeneous and perishable input. The reduced form of this model is estimated as an expanded random parameter model that combines a nonlinear hedonic bid function and inverse input demand functions for characteristics. The model was estimated by using 289,405 transactions from the Icelandic fish auctions. Total catch and gut ratio were the main determinants of marginal prices of characteristics, while the price of cod mainly depended on size, gutting and storage.     

HEDONIC PRICE INDEXES FOR RESIDENTIAL HOUSING: A SURVEY,EVALUATION AND TAXONOMY

Every house is different. It is important that house price indexes take account of these quality differences. Hedonic methods which express house prices as a function of a vector of characteristics (such as number of bedrooms and bathrooms, land area and location) are particularly useful for this purpose. I consider here some developments in the hedonic methodology, as it is applied in a housing context, that have occurred in the last three decades. A number of hedonic house price indexes are now available. However, it is often difficult to see how these indexes relate to each other. For this reason I attempt to impose some structure on the literature by developing a taxonomy of hedonic indexes, and then show how existing indexes fit into this taxonomy. Also discussed are some promising areas for future research in the hedonic field. In particular, greater use needs to be made of spatial econometric and nonparametric methods to exploit the increased availability of geospatial data. The main criticisms of the hedonic approach are evaluated and compared with those of the repeat‐sales and stratified median methods. The overall conclusion is that the advantages of the hedonic approach outweigh its disadvantages.     

Intermediated surge pricing

Although Uber and Lyft are known for their flexible “surge pricing,” they are surprisingly rigid in another way: each firm takes a constant percentage of passenger fare whether or not there is a surge. In this paper, I investigate the possible reasons for, and the impact of, this rigidity. I study a market in which a profit‐maximizing intermediary facilitates trade between buyers and sellers. The intermediary sets prices for buyers and sellers, and keeps the difference as her fee. Optimal prices increase when demand increases, that is, shifts right. If a demand increase is due to an increase in the number of ex ante symmetric buyers, then the intermediary's optimal percent fee decreases. If, instead, a demand increase is due to a reduction in the elasticity of demand, then the intermediary's optimal percent fee increases. In either case, if the intermediary keeps a constant percent fee regardless of shifts in demand, as is the case with Uber and Lyft, then surge pricing (i.e., the ratio of price during high demand to price during low demand) is amplified on one side of the market and diminished on the other side.     

Hedonic prices,demands for urban housing amenities,and benefit estimates

This paper uses a Rosen, two-step, hedonic price-trait demand approach to estimate demand functions for a vector of urban amenities. To ascertain whether this theoretically preferred approach yields benefit estimates which differ from the oft-used Ridker-Henning, one-step, hedonic approach we conduct a sensitivity analysis. We find that the two-step approach does yield different benefit estimates and that the differences are large for some amenities. The estimates are sensitive to the functional form of the hedonic equation when the forms are significantly different according to modified Box-Cox results, but are not particularly sensitive to specification of the amenity demand equation.     

COEFFICIENT CHANGE,PRICE EFFECTS,AND IMPLICIT ELASTICITIES: ESTIMATING MICROECONOMIC DETERMINANTS OVER TWO TIME PERIODS

This paper presents and estimates an input–output model in which input coefficient changes are functions of changing prices. The model produces results that mirror the characteristics of input demand functions based on the model of cost minimization subject to producing a desired level of output. It does not rely on the specification of a functional form for input coefficients, and it does not require the use of assumptions regarding the elasticity of substitution. Instead, it allows the actual price and coefficient changes that occur between periods to identify the implicit elasticities and own- and cross-price derivatives. Using this model, it is shown how accurate measures of price effects, including the full array of own and cross-elasticities of demand, can be estimated for models comprising up to 15 sectors given data for only two time periods.     

Hedonic markets and sorting equilibria: Bid-function envelopes for public services and neighborhood amenities

Hedonic regressions with house value as the dependent variable are widely used to study public services and neighborhood amenities. This paper builds on the theory of household bidding and sorting across communities to derive bid-function envelopes, which provide a form for these regressions. This approach allows for household heterogeneity and multiple amenities, yields estimates of the price elasticity of amenity demand directly from the hedonic without a Rosen two-step procedure, and provides tests of hypotheses about sorting. An application to Cleveland area data from 2000 yields price elasticities for school quality and neighborhood ethnic composition and supports the sorting hypotheses.     

Housing demand in Mexico

This paper analyzes the components of housing demand in Mexico in the context of developing and developed nations. The case of Mexico is particularly interesting given that population and income dynamics, as well as current housing shortages, suggest that the demand for housing will significantly increase in the near future. We use micro-level data from market-based mortgages that originated during the period of 2002 to 2004 for 21 metropolitan areas in Mexico. We find the price elasticity of housing demand to be ?0.3, lower than previous studies for developed countries and within the range for developing countries. Permanent income is a major component of housing demand, with an elasticity of 0.8. In contrast, temporary income has a very low elasticity of 0.04. The mortgage rate elasticity for 25-year mortgages is ?0.39. We believe these results provide important information to policy makers and practitioners in Mexico and other developing nations.     

政府保障房供求补贴的不同效果

解决中低收入人群的基本住房问题是实现社会公平的基本国策之一。为了有效地实施保障性安居工程，通过构建数学模型研究在财政补贴率相同的条件下，住房消费补贴与住房供给补贴的成交价格、成交量与社会福利情况，可以发现这两者之间存在较大的差别，前者的成交价格、成交量和社会福利都高于后者，但前者比后者的财政补贴额更多。如果提高财政补贴率，那么前者成交价格会不断提高，而后者成交价格会不断降低，成交量都会呈现扩大趋势。成交价格、成交量和社会福利不但与财政补贴率及其补贴方式有关，也与住房的需求弹性和供给弹性有关。研究结论的政策意义在于，如果在政府财力有限、住房价格上涨压力较大的条件下，应当采用住房供给补贴；如果在政府财力相对宽松、住房价格上涨压力相对较小、依靠住房拉动经济增长的压力较大的条件下，则应当采用住房消费补贴，同时它还能实现公平与效率兼顾的目的。无论是采用住房消费补贴还是住房供给补贴，都应当增大供给弹性，减小需求弹性。     

Hedonic prices and composite commodities

In this paper we conjecture and, to an extent, prove that recently noted restrictions required for the logical coherence and empirical relevance of hedonic price models make these models no more general than traditional housing services models. In particular, intra-urban variation in hedonic prices may not be substantively related to market equilibration at all, and therefore is not evidence for the existence of housing sub-markets. Moreover, in the case of jointly produced housing characteristics, the hedonic price models are found to be less general than the traditional homogeneous housing services models.