Beyond implicit prices: recovering theoretically consistent and transferable values for noise avoidance from a hedonic property price model

Brett Day, Ian Bateman, Iain Lake

Research output: Contribution to journalArticlepeer-review

119 Citations (Scopus)


Using a two-stage hedonic pricing methodology we estimate a system of structural demand equations for different sources of transport-related noise. In the first stage, we identify market segments using model-based clustering techniques and estimate separate hedonic price functions (HPFs) for each segment. In so doing, we show how a semiparametric spatial smoothing estimator outperforms other standard specifications of the HPF. In the second stage, we control for non-linearity of the budget constraint and identify demand relationships using techniques that account for problems of endogeneity and censoring of the dependent variable. Our estimated demand functions provide welfare estimates for peace and quiet that we believe to be the first derived from property market data in a theoretically consistent manner.
Original languageEnglish
Pages (from-to)211-232
Number of pages22
JournalEnvironmental and Resource Economics
Issue number1
Publication statusPublished - May 2007


  • Noise
  • Non-market valuation
  • Hedonic pricing
  • Model-based clustering
  • Partial linear model
  • Spatial smoothing
  • Demand system
  • Simultaneous-equation Tobit

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