We present a three-stage, nonparametric estimation procedure to recover willingness to pay for housing attributes. In the first stage we estimate a nonparametric hedonic home price function. In the second stage we recover each consumer's taste parameters for product characteristics using first-order conditions for utility maximization. Finally, in the third stage we estimate the distribution of household tastes as a function of household demographics. As an application of our methods, we compare alternative explanations for why blacks choose to live in center cities while whites suburbanize.
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Bajari et al. (2004) studied this question.
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