Spatial Price Research Articles

Valuing Recreational Beaches: A Spatial Hedonic Pricing Approach

Despite several studies that have estimated the economic value of beach proximity on housing values, previous linear hedonic pricing models (HPMs) have yet to explore the spatially heterogeneous beach premiums for housing prices. To address the issue, this study demonstrated the feasibility of spatial HPM (S-HPM) using geographically weighted regression (GWR) analysis of 152 properties in Jacksonville Beach, Florida. Specifically, this study (1) investigated the spatial associations between multiple beach proximity attributes and housing values, (2) explored local variations in modeling housing values, and (3) assessed whether GWR-based S-HPM outperformed previous linear HPM. Results indicated that the GWR-based S-HPM revealed spatially heterogeneous beach premiums for housing values, with improvements in model performance over the corresponding linear HPM. Findings of this study can contribute to understanding the local patterns of beach premiums for housing prices, ultimately providing guidelines for location-based beach access planning and management.

Some analytical results on spatial price differentiation in first–best congestion pricing schemes

In this study, we examine a class of first–best congestion pricing schemes that employ various strategies to differentiate price spatially. Since spatial price differentiation raises the issue of privacy infringement, two hybrid pricing schemes are proposed to internalize travelers’ privacy cost. Under these schemes, a traveler is given the options to maintain her anonymity and pay a “regular” toll, or compromise her privacy and receive a discount. One of the hybrid schemes allows the traveler’s privacy cost to be dependent on the link composition of the traveler’s path. In other words, she can choose to disclose none, part, or all of her path information. We prove that the minimum toll burden—with or without the privacy cost—required to decentralize a system optimum gradually decreases as the toll becomes more spatially differentiated. We also show that the new hybrid scheme demonstrates some interesting analytical properties compared to existing schemes.

Market integration and spatial price transmission in grain markets of Turkey

ABSTRACTThis paper examines whether the grain market of Turkey is cointegrated with the world grain market. Using an error correction model, we analyse the response of producer prices of wheat, barley, maize, soybean and rice to changes in world market prices. Results show that the rice market of Turkey is not cointegrated with the world rice market, while the other commodity markets are weakly cointegrated. Results also show that pass-through of changes in the world prices to the domestic prices is relatively low both in the short run and in the long run, and that adjustment to the new equilibrium following a shock is slow. Government intervention policies both at the border and as domestic price supports seem to be underlying causes of the weak cointegration. Fewer protectionist policies and lower levels of government intervention are necessary to increase the domestic grain market integration with the international grain market.

Market Integration of Sesame Seeds in South Asia

The present research empirically determined the spatial price linkage of South-Asia exporting sesame seeds markets with the importing market using annual producer’s price sourced from FAO database. The analytical techniques used to achieve the stated objective were descriptive and inferential statistics. The empirical findings showed that the selected markets were not autarkic as price information was efficiently transmitted across the geographical far apart markets. Furthermore, the traders effectively responded to price innovation or shock in order to maintain price equilibrium in their respective markets. Evidence showed that hike in low-quality prices would be relatively less reflected in Bangladesh and Pakistan markets. Thus, the study recommended network design for sesame producer’s markets across the region at an almost equal distance from each other to enhance integration and better price communication among the exporting and importing economies.

Sub-National PPPs Based on House and Real Income Disparity across China: a Distinctive Spatial Deflator

Comparisons of real income within a country generally imply a deflation for relative price differences across regions. Housing services are the main source of spatial price difference because of the fixity of land supply. This paper argues that housing prices can synthetically reflect the general price level and proposes to estimate the subnational purchasing power parities (PPPs) based on the housing market as a distinctive spatial deflator to measure real income disparity. With a sample of urban and rural regions ranging from 1999 to 2015, house price relatives are estimated with the country-product-dummy (CPD) method; then, the subnational PPPs are calculated with the classic Gini-Elteto-Koves-Szulc (GEKS) method. The results show that the subnational PPPs in the east regions are always high, while those in the middle and west regions are usually low for both urban and rural areas. The values of subnational PPPs for different regions change over time, while the trends are inconsistent between the east regions and the middle and west regions. Taking the subnational PPPs as a new distinctive spatial deflator, provincial income disparity exhibits an obvious descending trend. Notably, income disparity decreased significantly after deflating, for both urban and rural regions.

The spatial price map of India drawn using pseudo unit values

Purpose This study aims to apply a proposed methodology for calculating spatial prices in a heterogeneous country setting such as India with limited price information. Based on the empirical evidence, the study plans to draw the spatial price map of India with different colours denoting states and districts with varying level of spatial prices. Design/methodology/approach This study shows that a procedure proposed by Lewbel (1989), based on the idea by Barten (1964) that household composition changes have “quasi-price effects”, can be used to estimate spatial prices in the absence of information on regional prices. Findings The evidence on spatial price differences in India, which is the most comprehensive to date because it goes down to district level, shows that the proposed procedure has considerable potential in future applications on other data sets with limited price information. The policy importance of the results is underlined by the sensitivity of the demand elasticities to the inclusion/omission of spatial price variation. Research limitations/implications The study uses “pseudo unit values” based on household composition and demographic effects on demand as proxy for the missing price information. While the work of Atella et al. (2004) suggests that such proxies are accurate representations of true prices, nevertheless, they are proxies and the results should be treated with caution. Practical implications The evidence on spatial prices in India that point to a high degree of price heterogeneity between regions implies that welfare applications such as income distributional and poverty studies must take account of the price heterogeneity within the country. The implications extend beyond India to cross-country exercises such as the purchasing power parity calculations undertaken by the International Comparison Project. Originality/value This is one of the first studies that provide evidence on spatial price heterogeneity within a country without requiring regional price information. Methodologically, the paper builds on the suggestion of Lewbel (RES, 1989) in showing how the demographic effects on household expenditure pattern can be used to estimate spatial prices. The value of the contribution lies in the use that the estimated spatial prices can be put to in calculating inequality and poverty rates and in standard of living comparisons between regions in the country.

How Useful Is CPI Price Data for Spatial Price Adjustment in Poverty Measurement? A Case from Ghana

Measuring and comparing the levels of household welfare and poverty in a country require cost-of-living differences across regions to be properly adjusted. In measuring the spatial cost of living, the recent literature underscores the importance of detailed product quality information in the price data. Taking advantage of the price data availability in Ghana, this case study explores the Consumer Price Index price data as a source for spatial price measurement. It applies the country product dummy method to the Consumer Price Index price data and compares the results with other methods based on different price data. The empirical analysis indicates a potential bias in estimating spatial prices stemming from the lack of product quality information and, therefore, suggests the potential usefulness of the Consumer Price Index price data for spatial price adjustment in poverty analysis in low- and middle-income countries.

Measuring Spatial Price Differentials: A Comparison of Stochastic Index Number Methods

Spatial price comparisons rely to a high degree on the quality of the underlying price data that are collected within or across countries. Below the basic heading level, these price data often exhibit large gaps. Therefore, stochastic index number methods like the CPDmethod and the GEKS method are utilised for the aggregation of the price data into higher-level indices. Although the two index number methods produce differing price level estimates when prices are missing, the present paper demonstrates that both can be derived from exactly the same stochastic model. In addition, for a specific case of missing prices, it is shown that the formula underlying these price level estimates differs between the CPD method and the GEKS method only with respect to the weighting pattern applied. Lastly, the impact of missing prices on the efficiency of the price level estimates is analysed in two simulation studies. It can be shown that the CPD method slightly outperforms the GEKS method. Using price data of Germany's Consumer Price Index, it can be observed that more narrowly defined products lead to efficiency gains in the estimation.

Spatial Differentiation and Market Power in Input Procurement: Evidence from a Structural Model of the Corn Market

We estimate the cost of transporting corn and the resulting degree of spatial differentiation among downstream firms that buy corn from upstream farmers and examine whether such differentiation softens competition enabling buyers to exert market power (defined as the ability to pay a price for corn that is below its marginal value product net of processing cost). We estimate a structural model of spatial competition using corn procurement data from the U.S. state of Indiana from 2004 to 2014. We adopt a strategy that allows us to estimate firm-level structural parameters while using aggregate data. Our results return a transportation cost of $0.12 per bushel per mile (5% of the corn price under average distance traveled), which provides evidence of spatial differentiation among buyers. The estimated average markdown is $0.80 per bushel (16% of the average corn price in the sample), of which $0.34 is explained by spatial differentiation and the rest by the fact that firms operated under binding capacity constraints. We also find that corn prices paid to farmers at the mill gate are independent of distance between the plant and the farm, providing evidence that firms do not engage in spatial price discrimination. Finally, we evaluate the effect of hypothetical mergers on input markets and farm surplus. A merger between nearby ethanol producers eases competition, increases markdowns by 20%, and triggers a sizable reduction in farm surplus. In contrast, a merger between distant buyers has little effect on competition and markdowns.

Assessment of spatial price linkages in the major potato-assembling markets in India

Assessment of spatial price linkages in the major potato-assembling markets in India

Spatial pricing with multiple risk transmission channels and specific factors

This study synthesizes interactions among real link and informational risk transmission channels to construct a spatial weight matrix and considers the effects of specific factors on returns through such interactions. We propose a spatial pricing model with multiple risk transmission channels and specific factors. The empirical results of an application of the spatial pricing model to industry assets in the Chinese stock market show that (1) the interaction plays a significant role in explaining asset return. The multiple risk transmission channels based spatial weight matrix improves the performance of the spatial pricing model, and specific factors further improve the performance; (2) the feedback effects and indirect effects of specific factors indicate the importance of interaction and specific factors in the pricing model; and (3) the spatial pricing models are asymmetric in different regimes.

Measuring the spatial price differences in China with regional price parity methods

AbstractThe measurement of prices has been an important field in economics, and a spatial price index is very useful in comparing the standards of living and well‐being across regions in a country. This paper intends to measure the regional price parities (RPPs) across different provincial areas in China with an urban sample of 140 goods and services in 2015 according to the framework of the International Comparison Program (ICP) methodology. The results show that the RPPs that were estimated with commonly used approaches, such as the Gini–Éltetö–Köves–Szulc (GEKS), Geary–Khamis (GK) and weighted country product dummy (WCPD), are only slightly different. The RPPs of three regions including Guangdong, Shanghai and Zhejiang are greater than 1 (with Beijing = 1), while the other 27 regions are all lower than 1, which represents price levels that are less than Beijing. In the extrapolation of the RPPs from 2000 to 2014, a significant descending trend is found for the standard deviation series of the RPPs over time that shows that the price differences across regions decreased during the extrapolating period. This finding provides evidence of a phenomenon of spatial price converging in China. Finally, a study on the deflation of provincial aggregates with the RPPs reveals that the spatial price adjustment will change the ranks or relative importance of different regions in the country. Especially, the measurement of income inequality proves that the Gini coefficients of provincial income deflated by the RPPGEKS are all lower than the Gini coefficients of unadjusted incomes.

Spatial price competition in the Manhattan hotel market: The role of location, quality, and online reputation

We investigate whether and to what extent price competition among hotels in Manhattan is driven by geographic location, quality, and online reputation. We investigate (a) which of the three product differentiation dimensions matters most for hotels' pricing decisions and (b) whether and to what extent competition is localized. Results show that hotel quality and geographic location matter the most for price competition. Whereas hotels of similar reputation also react to each other's prices, the effect is less important. Also, results indicate that hotels' prices react most aggressively to prices set by the four nearest hotels in the area.

SPATIAL PRICE EQUILIBRIUM AND THE TRANSPORT SECTOR: A TRADE‐CONSISTENT SCGE MODEL

In spatial computable general equilibrium models, interregional trade ought to play an important role in determining the spatial price equilibrium. Although the Armington assumption is commonly employed to describe cross‐hauling, many of the existing models do not explicitly consider the behavior of transport firms. This paper presents a framework that is compatible with the Armington assumption and explicitly considers transport activities. In the model, the trade coefficient takes the form of a potential function, and the equilibrium market price becomes similar to the price index in the context of new economic geography. The features of the model are investigated by using the minimal setting, which comprises two nontransport sectors and three regions. Because transport costs are given exogenously, the commodity prices are determined relative to them. The model can be described as a system of homogeneous equations, where an output in one region can arbitrarily be determined similarly as a price in the Walrasian equilibrium.

Optimal Spatial Pricing for an On-demand Ride-sourcing Service Platform

This paper investigates a long-term optimal spatial pricing strategy for a ride-sourcing platform that serves a particular (possibly populated) area with profit-driven service providers (i.e., drivers) and time- and price- sensitive customers. By observing that oftentimes, the pricing strategy is anisotropic and spatially dependent, and both the supply and request rates are endogenous, we build an analytical bi-level optimization model. In the upper-level formulation, the ride-sourcing platform aims to set up the spatially heterogeneous pricing strategy to maximize its total profit. While in the lower level, we solve the trip distribution model that characterizes the optimal flow rates among zones given the travel demand rate at each zone. We prove that when the platform seeks to expand its business, the optimal number of participating drivers and their optimal wages will be influenced not only by the pricing strategy but also by the levels of service of the service zones. Our further investigation shows that the profit at a particular zone can be also influenced by the potential customers' service requests from the other zones. Finally, we use the real-world data provided by DiDi Chuxing to numerically validate our theoretical results.

Vertical and spatial price transmission in the Mexican and international milk market

During the last two decades, the Mexican dairy sector experienced important structural changes, especially after the implementation of the NAFTA agreement. In 2016, the Bank of Mexico observed that in milk market, the final prices tend to rise when input prices increase, however; they do not decrease when input prices decrease. In this context, this study examines the degree of spatial and vertical price transmission between farm milk prices and international milk prices as well as between farm milk prices and retail milk prices, in order to assess the efficiency level of the Mexican and international dairy market. The findings of this research provide contributions to decision makers and industry stake-holders: a unidirectional transmission of international milk prices to domestic milk prices and from farm price to retail price along with the existence of asymmetric price transmission which depends on whether milk prices are increasing or decreasing. The results have shown that a long-run single co-integration relationship exists between international and farmer’s prices and between retail and farm price; that the direction of price transmission tends to go from producers to retailers and from international to farmer price and that when international price increase the speed of adjustment tend to be significantly slower, and that when international price decrease, the speed of adjustment tend to be significantly faster.

Structural Changes on Pulpwood Market in the US South: Wood Pellets Investments and Price Dynamics

AbstractWe investigated the impact of wood pellet mills on pulpwood price structure in the US South. Rather than focusing exclusively on price elasticities, we progress by examining how wood pellet production has affected the spatial transmission of pulpwood prices. Pairwise price ratios were modeled using smooth transition regression to identify changes in the cointegration (linkage) between markets over time. A logistic model was fitted to estimate market linkages as a function of market distances, industry concentration, and capacity of pellet wood production. Results show that the US South is not composed of market clusters, but each market pair has a particular relation. Distance and wood pellet production capacity are the only factors driving market linkages; the pulp and paper industries did not affect market structure changes. Our research suggests spatial price transmission varies over time, and pellet mills have caused a structural change in the pulpwood prices in the US South.

Transmisión de los precios del arroz en Colombia y el mundo

The aim of this paper is to analyse the spatial price transmission of rice in Colombia, emphasizing the impact of trade policies. For this purpose, a Markov-switching vector error correction model was used to model regime shifts in the relationship between domestic and international rice prices in Colombia and some control countries, from January 1996 to September 2018. The results reveal three price transmission regimes that coincide with internal trade policies and with the food crisis of 2007-2008. The high volatility regime was the most persistent, with an average duration of 15.4 months, a transition probability of 93 % and an adjustment speed of 0.24. In addition, during this regime, Colombia was less integrated into the international rice market. These results are relevant, since they constitute the application of a threshold methodology to the analysis of the transmission of agricultural prices and can be useful for the design of agrarian policies that contribute to the integration and competitiveness of the Colombian rice sector.

Spatial Price Transmission and Trade in the European Dairy Sector

There exists a large literature on spatial price transmission in agro-food sectors, but research on milk sector is relatively limited. In addition, we cannot generalize the results of these studies due to their diversity in terms of methodology, periods and countries. The aim of the paper is precisely to generalize, or at least broaden the evidence on horizontal price transmission in European Union dairy market. We employ two stages approach. First, we test whether Law of One Price exists among European Union member states. Second, we try to explain our findings based on gravity model framework in a binary choice setting. Our results are in line with theoretical expectations: the volume of milk traded and Eurozone membership positively, the geographical distance negatively affects the probability of perfect price transmission. In addition, we show that horizontal price transmission is dependent on political group variables (New Member States versus Old Member States).

Spatial Price Transmission and Trade in the European Dairy Sector

There exists a large literature on spatial price transmission in agro-food sectors, but research on milk sector is relatively limited. In addition, we cannot generalize the results of these studies due to their diversity in terms of methodology, periods and countries. The aim of the paper is precisely to generalize, or at least broaden the evidence on horizontal price transmission in European Union dairy market. We employ two stages approach. First, we test whether Law of One Price exists among European Union member states. Second, we try to explain our findings based on gravity model framework in a binary choice setting. Our results are in line with theoretical expectations: the volume of milk traded and Eurozone membership positively, the geographical distance negatively affects the probability of perfect price transmission. In addition, we show that horizontal price transmission is dependent on political group variables (New Member States versus Old Member States).