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

B. Day, Ian Bateman, I. Lake

    Research output: Contribution to journalArticle

    90 Citations (Scopus)

    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.
    Original languageEnglish
    Pages (from-to)211-232
    JournalEnvironmental & Resource Economics
    Volume37
    Issue number1
    DOIs
    Publication statusPublished - 2007

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