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Title: Hedonic Prices and Implicit Markets: Estimating Marginal Willingness to Pay for Differentiated Products Without Instrumental Variables

Citation Type: Working Paper

Publication Year: 2011

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Abstract: The hedonic model of Rosen (1974) has become a workhorse for valuing the characteristics of differentiated products despite a number of well-documented econometric problems. For example, Bartik (1987) and Epple (1987) each describe a source of endogeneity in the second stage of Rosen's procedure that has proven difficult to overcome. In this paper, we propose a new approach for recovering the marginal willingness-to-pay function that altogether avoids these endogeneity problems. Applying this estimator to data on large changes in violent crime rates, we find that marginal willingness-to-pay increases by ten cents with each additional violent crime per 100,000 residents.

Url: https://www.nber.org/papers/w17611

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Authors: Bishop, Kelly, C; Timmins, Christopher

Series Title: NBER Working Paper Series

Publication Number: 17611

Institution: NBER

Pages: 38

Publisher Location:

Data Collections: IPUMS USA

Topics: Crime and Deviance

Countries: United States