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Yinger paper on hedonic equilibria in housing markets published in Journal of Housing Economics

Aug 31, 2015

Hedonic Equilibria in Housing Markets: The Case of One-to-One Matching

John Yinger

Journal of Housing Economics, August 2015

John M. Yinger

John M. Yinger

Neighborhood amenities, including public services, vary across locations, and a well-known theorem says that households with a higher marginal willingness to pay (MWTP) for an amenity sort into locations where the amenity is better. A higher MWTP is equivalent to a steeper bid function for the amenity, and the housing price function, which is the envelope of the household bid functions, reflects this sorting process. This paper derives equilibrium expressions for the amenity level as a function of a household’s relative MWTP under the assumption of one-to-one matching between household classes and amenity levels.