Working Paper: CEPR ID: DP1550
Authors: J. Vernon Henderson; Jacques-Francois Thisse
Abstract: This paper examines strategic behaviour of developers who, through offering different public good packages and revenue/fiscal schemes, compete for residents who are differentiated by income. There is an endogenous determination of numbers and sizes of communities. Developers have an incentive to strongly differentiate their public good offerings. In terms of pricing strategies, developers exhibit sharply contrasting behaviours. In low-income communities housing consumption is subsidized once lots are priced. In high-income communities housing consumption is generally taxed.
Keywords: land development; Tiebout model; strategic pricing; tax competition
JEL Codes: H7; L13; R5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| community income levels (R23) | pricing strategies adopted by developers (D49) |
| pricing strategies adopted by developers (D49) | segmentation of the population (R23) |
| income disparities (I24) | number of communities occupied (R23) |
| income disparities (I24) | community dynamics (Z13) |
| developers' strategic behaviour (L21) | contrasting pricing policies (D49) |