The traditional hedonic model uses market purchases to estimate implicit prices. Hedonic models composed of only public land purchases violate key assumptions of hedonic model theory. The resulting implicit prices cannot be interpreted as the purchasing agency's maximum willingness to pay. The problems are illustrated using a hedonic model of public land purchases in the Town of Brookhaven, on Long Island, New York, USA. The model reveals negative elasticities for attributes for which the agency has stated positive preferences. For example, the presence of unique glacial landforms (a positive attribute) was associated with a 97% increase in property cost. However, if purchasing the open space property prevented development that is incompatible with existing land uses (also a positive attribute), the property cost decreased by 69%. The results confirm that elasticities and implicit prices derived from open space “public hedonic models” should be interpreted in the context of the broader market for land, not as the agency's willingness to pay. The work has implications for open space preservation policies in urbanizing regions.
Erik Edward Nordman and John Wagner. "Public purchases and private preferences: Challenges for analyzing public open space acquisitions" Urban Forestry & Urban Greening
Vol. 11 Iss. 2 (2012)
Available at: http://works.bepress.com/erik_nordman/1/