The Role of Information in the Rosen-Roback Framework / Xuwen Gao, Ran Song, Christopher Timmins.

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Gao, Xuwen

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w28943.Publication details: Cambridge, Mass. National Bureau of Economic Research 2021.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: In this paper, we study the role of information in non-market valuation. We develop a variant of the Rosen-Roback model of inter-urban sorting that incorporates public access to information about air quality, and demonstrate that information constraints create a wedge between the revealed and true hedonic prices. Moreover, the direction and the magnitude of that wedge depends on the individual's perception bias. We empirically test our theoretical predictions by leveraging a natural experiment - the unexpected disclosure of PM2.5 data in China. We find that perception bias before the data disclosure leads to a downward estimation bias in hedonic valuation. The hedonic price of avoiding PM2.5 exposure increases substantially from 171 to 336 Chinese Yuan in response to the information shock. Our work sheds light on the application of Rosen-Roback theory for non-market valuation in countries where the public access to information is restricted.

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June 2021.

In this paper, we study the role of information in non-market valuation. We develop a variant of the Rosen-Roback model of inter-urban sorting that incorporates public access to information about air quality, and demonstrate that information constraints create a wedge between the revealed and true hedonic prices. Moreover, the direction and the magnitude of that wedge depends on the individual's perception bias. We empirically test our theoretical predictions by leveraging a natural experiment - the unexpected disclosure of PM2.5 data in China. We find that perception bias before the data disclosure leads to a downward estimation bias in hedonic valuation. The hedonic price of avoiding PM2.5 exposure increases substantially from 171 to 336 Chinese Yuan in response to the information shock. Our work sheds light on the application of Rosen-Roback theory for non-market valuation in countries where the public access to information is restricted.