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Discrete choice models with capacity constraints: An empirical analysis of the housing market of the greater Paris region

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  • de Palma, Andre
  • Picard, Nathalie
  • Waddell, Paul

Abstract

Discrete choice models are based on the idea that each user can choose both freely and independently from other users in a given set of alternatives. But this is not the case in several situations. In particular, limitations and interactions can occur when the number of available products of one type is smaller than the total demand for this type. As a consequence, some individuals can be denied their preferred choice. We develop a methodology to address those constraints and we apply it to residential location choice, where our empirical data suggest that availability constraints may bias actual choices. The analysis provides some theoretical developments and elaborates an iterative procedure for estimating demand in the presence of capacity constraints. The empirical application relies on the location choice model developed and estimated in [6] for Ile de France (Paris region) and generalizes it to integrate capacity constraints.
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Suggested Citation

  • de Palma, Andre & Picard, Nathalie & Waddell, Paul, 2007. "Discrete choice models with capacity constraints: An empirical analysis of the housing market of the greater Paris region," Journal of Urban Economics, Elsevier, vol. 62(2), pages 204-230, September.
    • Handle: RePEc:eee:juecon:v:62:y:2007:i:2:p:204-230
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    1. de Palma, Andre & Rouwendal, Jan, 1996. "Availability Constraints in the Housing Market," Journal of Housing Economics, Elsevier, vol. 5(2), pages 105-132, June.
    2. Daniel McFadden, 1977. "Modelling the Choice of Residential Location," Cowles Foundation Discussion Papers 477, Cowles Foundation for Research in Economics, Yale University.
    3. Jordan Louviere & Kenneth Train & Moshe Ben-Akiva & Chandra Bhat & David Brownstone & Trudy Cameron & Richard Carson & J. Deshazo & Denzil Fiebig & William Greene & David Hensher & Donald Waldman, 2005. "Recent Progress on Endogeneity in Choice Modeling," Marketing Letters, Springer, vol. 16(3), pages 255-265, December.
    4. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    5. John M. Quigley, 1976. "Housing Demand in the Short Run: An Analysis of Polytomous Choice," NBER Chapters, in: Explorations in Economic Research, Volume 3, number 1, pages 76-102, National Bureau of Economic Research, Inc.
    6. de Palma, Andre & Motamedi, Kiarash & Picard, Nathalie & Waddell, Paul, 2005. "A model of residential location choice with endogenous housing prices and traffic for the Paris region," European Transport \ Trasporti Europei, ISTIEE, Institute for the Study of Transport within the European Economic Integration, issue 31, pages 67-82.
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    More about this item

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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