Revealed Preference for Relative Status: Evidence from the Housing Market

Posted: 30 Mar 2009  

Justin M. Ross

Indiana University - School of Public & Environmental Affairs

Susane Leguizamon

West Virginia University - College of Business & Economics

Date Written: March, 30 2009

Abstract

This paper investigates the value individuals place on their relative status in consumption, as opposed to absolute status. Using observed housing sales from three Ohio MSAs in 2000, we employ a spatial hedonic price model to estimate the total marginal willingness-to-pay for both relative and absolute characteristics of housing units. Using this revealed-preference approach, we find evidence that strongly suggests that while individuals do desire relative status, they value absolute status considerably more. For instance, our estimates indicate that if all homes in Columbus were to increase in size by 100 square feet the average house would increase in sale price by \$559, suggesting that the absolute effect of having more house dominates the relative effect of neighboring homes increasing as well.

Keywords: Happiness, social welfare, revealed preferences, spatial econometrics, housing market

JEL Classification: D630, Z100, R310

Suggested Citation

Ross, Justin M. and Leguizamon, Susane, Revealed Preference for Relative Status: Evidence from the Housing Market (March, 30 2009). Available at SSRN: https://ssrn.com/abstract=1370520

Justin M. Ross

Indiana University - School of Public & Environmental Affairs ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Susane Leguizamon (Contact Author)

West Virginia University - College of Business & Economics ( email )

P.O. Box 6025
Morgantown, WV 26506
United States

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