Estimating Preferences for Neighborhood Amenities Under Imperfect Information

46 Pages Posted: 7 Dec 2020 Last revised: 17 Jun 2021

See all articles by Fernando V. Ferreira

Fernando V. Ferreira

University of Pennsylvania - The Wharton School

Maisy Wong

The Wharton School, University of Pennsylvania

Date Written: December 2020

Abstract

This paper presents a new framework to estimate preferences for neighborhoods in the presence of individual imperfect information about every amenity in each neighborhood. We estimate the model with data from a new neighborhood choice program that provided information about market rents and same-school network, and collected neighborhood rankings for the same individual before and after receiving information. We find that switchers - who change rankings after the information intervention - increase network shares by 1.46 percentage points and decrease rents by $430. This variation from the panel data of individual rankings is critical to produce a latent quality index that addresses biases arising from imperfect information. Estimates from the neighborhood sorting model reveal a strong negative marginal utility of rents, and a positive marginal willingness to pay of $123 per month to live in a neighborhood with a larger network. Finally, information also influenced residential choices after graduation.

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Suggested Citation

Ferreira, Fernando V. and Wong, Maisy, Estimating Preferences for Neighborhood Amenities Under Imperfect Information (December 2020). NBER Working Paper No. w28165, Available at SSRN: https://ssrn.com/abstract=3743898

Fernando V. Ferreira (Contact Author)

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
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215-898-7181 (Phone)
215-573-2220 (Fax)

HOME PAGE: http://real.wharton.upenn.edu/~fferreir/

Maisy Wong

The Wharton School, University of Pennsylvania ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-746-3470 (Phone)

HOME PAGE: http://maisy.wharton.upenn.edu/

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