Using Quantile Regression in Hedonic Analysis to Reveal Submarket Competition

Abstract

In this paper, we use quantile regression analysis to explore therole submarket competition plays in setting housing prices inthose price ranges where different submarkets occupy homes ofsimilar price. We find evidence of direct competition betweensubmarkets with different preferences for at least some homesin a single neighborhood. By examining hedonic parameterinstability at different housing price levels, we uncover not onlylatent diversity among homeowners but direct competitionbetween them, which calls into question policy and marketconclusions drawn from standard hedonic price models,especially large sample hedonic studies.