A Market-Consumer Model of Residential Property Values.
TEXAS UNIV AT AUSTIN CENTER FOR CYBERNETIC STUDIES
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The paper presents a model of residential property values which is more complete and theoretically grounded than previous regression studies of environmental pollution and land values. Using the distribution model of linear programming a constrained regression hypothesis is presented which strongly interacts with the theory that generated it. The full use of dual evaluators for estimation purposes is a central feature of the new model, and is an innovative contribution. It is not necessary to observe the purchase price of individual properties, since these and interval estimates of other offer prices follow theoretically from the regression results. Having characterized a market solution to the housing allocation problem, the consumers decision problem is considered, and his solution is shown to be in general incompatible with market conditions. This incompatibility is resolved by the use of a multipage or decomposable linear program which incorporates both consumer goals and market conditions. The method of solution of this problem reflects the gain of information leading to a residence purchase by each consumer, and demonstrated the value of the decomposition principle in consumer theory.
- Economics and Cost Analysis
- Operations Research