The two primary approaches to estimate marginal willingness-to-pay (MWTP) are hedonic (Rosen,1974) and discrete choice (McFadden,1974). While both approaches rely on revealed preference methods to estimate MWTP, the primitives underlying both models are different, making it difficult to compare them. This paper establishes the assumptions needed to develop a tractable framework to compare both approaches. I begin with a discrete choice model and show how to derive the gradient of the equilibrium price function implicitly. I then incorporate Rosen’s insight that the price gradient is equal to the MWTP of the marginal individual whose indifference curve is tangent to the price function in equilibrium. However, with discrete choices, some individuals may be inframarginal and their indifference curves will not be tangent to the price function. The analytical mapping I derive formalizes this intuition and shows that the price gradient depends on weighted averages of marginal utilities where higher weights are assigned to individuals whose choice probabilities indicate more uncertain choices (marginal individuals). As this choice becomes more certain, the weights start to decrease. This result shows how choice probabilities and other moments of choice data can be used to distinguish marginal versus inframarginal individuals.
1010 Affordable Housing Amazon Amenitization Architecture Artificial Intelligence Asia Australia automation Autonomous Vehicles Borrowing Constraints Brexit California Canada Capital Business China Co-Working Environment coastal markets Colombia Commercial Brokerage Commercial Real Estate commissions Congestion consumer bias covid-19 CRE credit card market Credit Default Swaps Credit Insurance Credit Risk Transfers Culture Data Analytics Data Collection Technology Debt Market Demand Demographics Density Development Discrete Choice disruption Diversity drones e-Commerce Economic Corridors economic policy economics Equity Funds Equity Market Ethnic Factors Europe Fannie Mae financial asset management Foreclosures Foreign Policy France Freddie Mac general equilibrium Global Global Financial Crisis Globalization great depression Great Recession Hedonic Housing & Residential housing boom Housing Disease housing prices Housing Supply Identity Income Inequality India Inter-generational mobility Investing jobs labor market Lagging Regions land use regulation Language Macroeconomics malls Market Pricing megacities Microeconomics Migration Minimum Payments Mixed-Use Mobility moral hazard mortgage insurance mortgage market Mortgage Rates Mortgages Multi-family Nation Building Non-Traditional Mortgages Office Market office sector Placed Based Policies Political Risk Price Discovery Private Equity Business public health Public Schools real estate brokerage Real Estate Investment Real Estate Investment Trusts Recession Rental Retail Retirement reverse mortgages Risk Adjustment risk-shifting robotics single family housing Slums Sorting South America Spatial Regions spillover effect Sub-Prime Mortgages Sustainability Technology trade transportation United States Urban Urbanization Warehouse welfare