On the Pricing Strategy of a Land Developer

Posted: 27 Mar 1998

See all articles by J. Vernon Henderson

J. Vernon Henderson

London School of Economics & Political Science (LSE); National Bureau of Economic Research (NBER)

Jacques-François Thisse

Catholic University of Louvain (UCL); Centre for Economic Policy Research (CEPR)

Abstract

This paper examines the pricing strategy of a developer facing potential clients heterogeneous in income. Two-part pricing and second degree discriminatory pricing strategies are characterized. Our results include the fact that the developer chooses either to charge a positive entry fee and a unit housing price above cost, or linear pricing of housing, depending on the share of housing in individual consumption as well as on the quality level of public services. Second degree discriminatory pricing improves upon the ability of the developer to exploit high income consumers.

JEL Classification: H7, L13, R5

Suggested Citation

Henderson, J. Vernon and Thisse, Jacques-François, On the Pricing Strategy of a Land Developer. Journal of Urban Economics. Available at SSRN: https://ssrn.com/abstract=71609

J. Vernon Henderson (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jacques-François Thisse

Catholic University of Louvain (UCL) ( email )

Place des Doyens 1
Louvain-la-Neuve, 1348
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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