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Beyond implicit prices: recovering theoretically consistent and transferable values for noise avoidance from a hedonic property price model

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  • Brett Day
  • Ian Bateman
  • Iain Lake

Abstract

Using a two-stage hedonic pricing methodology we estimate a system of structural demand equations for different sources of transport-related noise. In the first stage, we identify market segments using model-based clustering techniques and estimate separate hedonic price functions (HPFs) for each segment. In so doing, we show how a semiparametric spatial smoothing estimator outperforms other standard specifications of the HPF. In the second stage, we control for non-linearity of the budget constraint and identify demand relationships using techniques that account for problems of endogeneity and censoring of the dependent variable. Our estimated demand functions provide welfare estimates for peace and quiet that we believe to be the first derived from property market data in a theoretically consistent manner. Copyright Springer Science+Business Media, Inc. 2007

Suggested Citation

  • Brett Day & Ian Bateman & Iain Lake, 2007. "Beyond implicit prices: recovering theoretically consistent and transferable values for noise avoidance from a hedonic property price model," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 37(1), pages 211-232, May.
    • Handle: RePEc:kap:enreec:v:37:y:2007:i:1:p:211-232
    DOI: 10.1007/s10640-007-9121-8
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    More about this item

    Keywords

    Noise; Non-market valuation; Hedonic pricing; Model-based clustering; Partial linear model; Spatial smoothing; Demand system; Simultaneous-equation Tobit; Q51; C14; C21; C24;
    All these keywords.

    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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