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Hedonic model of segmentation with horizontal differentiated housing

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  • Masha Maslianskaia-Pautrel

Abstract

The purpose of this paper is to study how the hedonic equilibrium is modified when group-wise consumer heterogeneity with horizontal differentiated housing supply is assumed. We complete the hedonic segmentation analysis of Baudry and Maslianska¨ıa-Pautrel (2011a,b) for vertical differentiation of housing supply by investigating the more realistic case of horizontal differentiation. Our results confirm the segmentation of the hedonic price function at equilibrium and the discontinuity of the implicit price of environmental quality on the borders of the segments. We also demonstrate that horizontal differentiation can lead to a partial sorting of consumer demand for housing attributes at hedonic equilibrium. Finally we show that according to model specification, the group-wise heterogeneity with horizontal differentiation can lead to modification of welfare assessment related to changes in environmental quality.
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  • Masha Maslianskaia-Pautrel, 2012. "Hedonic model of segmentation with horizontal differentiated housing," TEPP Working Paper 2012-03, TEPP.
    • Handle: RePEc:tep:teppwp:wp12-03
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    1. Epple, Dennis & Platt, Glenn J., 1998. "Equilibrium and Local Redistribution in an Urban Economy when Households Differ in both Preferences and Incomes," Journal of Urban Economics, Elsevier, vol. 43(1), pages 23-51, January.
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