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From Neighborhoods to NationsThe Economics of Social Interactions$
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Yannis M. Ioannides

Print publication date: 2012

Print ISBN-13: 9780691126852

Published to Princeton Scholarship Online: October 2017

DOI: 10.23943/princeton/9780691126852.001.0001

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Location Decisions of Individuals and Social Interactions

Location Decisions of Individuals and Social Interactions

(p.79) Chapter 3 Location Decisions of Individuals and Social Interactions
From Neighborhoods to Nations

Yannis M. Ioannides

Princeton University Press

This chapter examines the location decisions of individuals, with particular emphasis on neighborhood effects in housing markets and how they relate to the role of prices in rationing admission to communities and neighborhoods in market economies. It begins by introducing models of individual location decisions that rely on the characteristics approach in the presence of contextual effects and use individual dwelling units as the object of choice. It then presents examples of sorting models that allow for choice of neighborhood with endogenous contextual effects, followed by a discussion of models and associated empirical results for neighborhood choice and housing as a joint decision that allow for social effects. It also describes models of location decisions, proposed by Thomas Schelling, that take into account the influence of racial preferences and neighbors' reactions. Finally, it looks at hierarchical models of community choice with social interactions.

Keywords:   location decisions, neighborhood effects, housing, social interactions, contextual effects, neighborhood choice, social effects, Thomas Schelling, racial preferences, community choice

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