CHAPTER8
HEDONIC PRICE METHODS
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
FIGURE 8.1 A valley divided into a clean region and a dirty region.
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
FIGURE 8.2 Effect of pollution on land rents and wages with productive pollution. A, wage/rent at pollution = p1;
B, wage/rent at pollution = p2; c(w,r,p) = 1, isocost lines; V(w,r,p) = k, isoutility lines. Note: p2> p1.
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
FIGURE 8.3 Wages, rent, and discretionary income, as a function of pollution levels.
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
FIGURE 8.4 Representative wage-pollution indifference curves for two different individuals
(higher utility associated with upward shifts in indifference curves).
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
FIGURE 8.5 Consumer choice. θ(y,z,U), amount of money available to bid for house with air quality
z, for a person with income y, obtaining utility U; p(z), price of house with air quality level z.
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
FIGURE 8.6 Producer choice. φA(r,z,π), house offer price when air quality level is z, input prices r, necessary to
give profit π; p(z), price of house with air quality level z.
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
FIGURE 8.7 Equilibrium in an hedonic market. φi , offer function for three producers, i = 1,2,3; θj , bid function
for three consumers, j = 1,2,3; Ek , equilibrium between producer k and consumer k, k = 1,2,3; p(z), price of
house with air quality level z.
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
FIGURE 8.8 Marginal willingness to pay for z. p’(z), slope of hedonic price line with respect to z (marginal value of z); MWTPi(z),
marginal willingness to pay for one more unit of z, consumers i = 1,2.
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.
FIGURE 8.9 Wage–risk relationship.
ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad
Copyright © 2011 by Oxford University Press, Inc.