Implicit markets and the demand for housing characteristics

Date

1983

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Abstract

The purpose of this dissertation is to provide a complete empirical model of the demand for housing characteristics vhich explicitly recognizes and accounts for the quantity dependence of marginal prices. Particular attention is given to the empirical implications of a non-linear price structure and the nature of the identification problem in the context of implicit markets. In addition, "Monte Carlo" simulations are employed to judge the accuracy of demand estimates under numerous sets of circumstances. Finally, the empirical model is utilized to estimate the housing characteristics demand parameters using data on individual households. While the specific contribution of this dissertation relates to the housing literature, the empirical technique developed here can be applied to any market where the price structure is nonlinear. Energy markets, with declining rate schedules, and labor markets, with progressive income taxes, are but two examples of markets with quantity dependent prices. Indeed, it is likely that most price structures are at least partially nonlinear. Consequently, the development of an empirical model that can successfully cope with the difficulties created by quantity dependent prices represents a significant contribution to applied microeconomic analysis.

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Keywords

Housing, Mathematical models, Urban economics, Home ownership

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