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C H A P T E R 8 HEDONIC PRICE METHODS ENVIRONMENTAL ECONOMICS – 2e

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Presentation on theme: "C H A P T E R 8 HEDONIC PRICE METHODS ENVIRONMENTAL ECONOMICS – 2e"— Presentation transcript:

1 C H A P T E R 8 HEDONIC PRICE METHODS ENVIRONMENTAL ECONOMICS – 2e
Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc.

2 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.

3 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.

4 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.

5 (higher utility associated with upward shifts in indifference curves).
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.

6 FIGURE 8. 5 Consumer choice
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.

7 give profit π; p(z), price of house with air quality level z.
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.

8 house with air quality level z.
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.

9 marginal willingness to pay for one more unit of z, consumers i = 1,2.
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.

10 FIGURE 8.9 Wage–risk relationship.
ENVIRONMENTAL ECONOMICS – 2e Charles D. Kolstad Copyright © 2011 by Oxford University Press, Inc.


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