Vertical Status : Evidence from High-Rise Condominiums Ben-Shahar, Danny; Yongheng, Deng; Solganik, Eyal; Somerville, Tsur; Hongjia, Zhu
The basic model in economics assumes that individual utility is a function of an individual’s own consumption. Yet, the pursuit of status, which depends on the recognition of others and one’s standing relative to others, is an important driver of human behavior. In this paper we estimate the value of a specific aspect of status: relative positioning. Our study is motivated by the literature in linguistics and psychology that correlates between the vertical ordering and well-being. We estimate the price that people are willing to pay for relatively higher position in vertical physical space. Using an extensive dataset of condominium transactions in mid- and high-rise buildings in Vancouver (Canada), we measure the premium paid for an apartment based on its relative height compared to other apartments in the same building and to the heights of nearby buildings. Controlling for unit characteristics, including actual height and view, along with building and time fixed effects, we find that there is an economically meaningful price premium for being higher up relative to others. Ceteris paribus, moving from the bottom to the top floor of a building generates an average premium of 6.4 percent of the average transaction price. A unit that is higher than all surrounding buildings generates an average premium of 3.7 percent relative to a unit that is below all surrounding buildings. Evidence further shows that people weight more heavily the disutility from having others positioned above them than the utility from having others below them and, correspondingly, that the marginal value of vertical status rises convexly within the building. Results are robust to a series of model and sample specifications.
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