HEDONIC PROPERTY VALUE METHOD:

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Hedonic Property Value Method

Chattopadhyay, Sudip, (1998) "An Empirical Investigation into the Performance of Ellickson's Random Bidding Model, with an Application to Air Quality Valuation," Journal of Urban Economics, 43, 292-314.

1. Characterize Ellickson's model.
2. What econometric problems with Rosen's two-step standard hedonic model are identified as impeding empirical success with this model?
3. Why are strategies for the categorization of households important in the random bidding model?
4. What is the modification employed by Lerman and Kern in order to solve the problem of under-identification in the random bidding model?
5. What specific air pollutant is considered in this model?
6. How close are the hedonic and random bidding models? Which specification is preferred under what circumstances?
7. How are income and family structure related to demand for environmental quality?

Cragg, Michael; Kahn, Matthew, "New Estimates of Climate Demand: Evidence from Location Choice," Journal of Urban Economics; 42(2), September 1997, 261-84.

1. What types of market choices are used to reveal willingness to trade off private consumption for local public goods for what group of individuals?
2. A conditional logit model is used for estimation. What is the dimensionality of this model (eg. how many choices are there, and what are their important attributes?
3. Are preferences for local public goods such as climate modelled as being homogeneous across demographic groups?
4. What assumption must be invoked to ensure that hedonic prices can be treated as exogenous?
5. Which data set is exploited to yield most of the variables this project requires?
6. What are some of the measured environmental variables that are assumed to be capitalized into wages and housing prices?
7. How can conditional logit results be used to rank state quality of life?
8. What interesting difference concerning California emerges from the conditional logit versus equilibrium hedonic rankings?
9. For which other environmental valuation problems do the authors suggest that their migration-type analysis might be appropriate?

Kiel, Katherine A., "Measuring the Impact of the Discovery and Cleaning of Identified Hazardous Waste Sites on House Values," Land Economics, 71(4), November 1995, pp. 428-35.

1. Kiel notes that the EPA's current process for ranking superfund sites estimates the cost to physically clean each site but ignores what other important factor?
2. What deficiencies does Kiel identify in previous studies designed to estimate the ipact of undesirable facilities on house values?
3. Why does Kiel argue that it is necessary to have observations on housing prices over a long time period surrounding the identification of a hazardous waste site?
4. How does Kiel construct data for distances from each house to each of the two hazardous waste sites in her study?
5. What types of house sales are excluded from the data set? Why?
6. Comment on the implications of the hedonic property value model Kiel uses.
7. Does Kiel conduct a thorough utility-theoretic welfare analysis in order to determine the potential benefits from cleaning up a toxic site? How would you characterize her analysis?

Clark, David E.; Nieves, Leslie A., "An Interregional Hedonic Analysis of Noxious Facility Impacts on Local Wages and Property Values," Journal of Environmental Economics and Management, 27(3), November 1994, pp. 235-53.

1. What is the main innovation in this paper relative to studies that consider only one type of noxious facility?
2. Why do the authors argue that one should model effects on both property and labor markets?
3. Why do the authors argue in favor of intercity, rather than intracity, data?
4. What were the main insights in the Roback and Blogmquist et al. studies?
5. Is the entire PUMS dataset employed in this study? Is the PUMS dataset the only data source?
6. What constitutes an observation? (Check how many there are.)
7. How are noxious facilities quantified in this study?
8. How do the housing value equation and income equation differ?
9. Are the signs of implicit prices on noxious facilities as expected? What explanations are offered?

Xu, Feng; Mittelhammer, Ron C.; Torell, L. Allen, "Modeling Nonnegativity via Truncated Logistic and Normal Distributions: An Application to Ranch Land Price Analysis," Journal of Agricultural and Resource Economics, 19(1), July 1994, pp. 102-14.

1. How were land transactions selected for this analysis? How were the Farm Credit Service data augmented? Is non-random sample selection suspected?
2. How is the non-negativity of land prices explicitly incorporated into the model? Why is a logistic, rather than a normal, distribution selected?
3. How does the specification purportedly allow testing of whether the truncation model is necessary?
4. Why is non-linear least squares estimation used, in lieu of MLE?

Kask, S. B.; Maani, S. A., "Uncertainty, Information, and Hedonic Pricing," Land Economics, 68(2), May 1992, pp. 170-84.

1. Are estimated hedonic prices based on endowed probabilities, or on individual subjective probabilities?
2. What are some reasons for "transformation bias" or "information bias" in consumers' interpretations of endowed probabilities?
3. What is the received theory on "probability transformation"?
4. How can information levels influence perceived risk?
5. How is the interpretation of hedonic prices different when considering the valuation of probabilistic nonmarket goods? Are the results conclusive and generalizable?

Kim, Sunwoong, "Search, Hedonic Prices and Housing Demand," Review of Economics and Statistics, 74(3), August 1992, pp. 503-08.

1. What feature of real housing markets does the author argue has been omitted from most previous housing demand and hedonic price models?
2. Why is the rental market studies, rather than the owner-occupied market?
3. Are there plausible comparative statics results from the theoretical discussion of the search model?
4. How are the "asking rent" and "reservation rent" models specified? When do we observe transactions? How does this differ from the conventional housing model with a single-equation demand function?
5. How does Kim propose to avoid the bias towards zero imparted by OLS used in the conventional model?
6. What source of data is employed by Kim? What software is used?
7. The standard single hedonic equation is nested within the truncated model proposed in this paper. How does the author test the adequacy of the standard specification for the hedonic equation?

Gilley, Otis W.; Pace, R. Kelley, "Improving Hedonic Estimation with an Inequality Restricted Estimator," Review of Economics and Statistics, 77(4), November 1995, pp. 609-21.

1. What common problem plaguing hedonic pricing models is addressed in this paper?
2. What source of prior information is proposed in the context of automobile hedonic pricing?
3. What are TWO ways that plausible a priori bounds might exist for the marginal value of hedonic characteristics?
4. A simple hedonic model of housing prices is used for illustration of the inequality restricted Bayesian (IRB) estimator. Where does the sample data come from? Where does the non-sample information come from?
5. Outline how the Monte Carlo exercises are formulated.
6. How does Bayesian estimation improve the accuracy of measurement of implicit characteristic values in the presence of multicollinearity?

Mills, Edwin S., Simenauer, Ronald, "New Hedonic Estimates of Regional Constant Quality House Prices," Journal of Urban Economics, 39(2), March 1996, pp. 209-15.

1. What is a "constant quality housing price"? Why is this something we'd like to know?
2. What gap in the literature does this paper seek to fill?
3. What are the properties of the National Association of Realtors 1986-1992 data set?
4. Could these data be augmented for the study of environmental quality?
5. How do the constant quality housing prices differ from the unadjusted housing prices calculated from NAR's huge sample of prices without associated characteristics?

Smith, V. Kerry; Huang, Ju Chin, "Can Markets Value Air Quality? A Meta-analysis of Hedonic Property Value Models," Journal of Political Economy, 103(1), February 1995, pp. 209-27.

1. What constitutes an "observation" in a regression meta-analysis study?
2. What are the regressors?
3. Does this type of paper constitute an "empirical literature review"?
4. What types of studies tend to be omitted from the pool of studies available for comparison?
5. What type of air pollutant is the focus of this effort to determine the "typical" marginal value of an additional unit of environmental quality?
6. Why are other pollutants not addressed?
7. Why is there a "Palmquist" dummy variable in the empirical analysis?
8. What are some of the criticisms that can typically be directed at analyses such as these?