Perceived Environmental Value in Revealed Data: Evidence from Housing Market

This paper combines survey data on homeowners’ stated perceptions with market transactions data to investigate how perceptions guide actual market behavior. The study shows that when a public amenity associated with housing is valued for its overall effect, this value captures a substantial amount of homeowners’ perceived values of its components. Even if the objective levels of the components of the public amenity do not vary, the paper shows that hedonic models can be effectively utilized to incorporate variation in perception for valuing the components of a public amenity. These results are based on the finding that homeowners choose to locate according to how they perceive a component of an amenity. Empirical results show that the homeowners of Waukegan, a small town near Chicago, Illinois have lost approximately $157 million in home value because of the perceived problems with the safety of the harbor. Chattopadhyay et. al.