Lake George in the Adirondack Mountains of upstate New York is a popular summer destination for residents of New York City. Lakeside homes allow users boating access, swimming and fishing access, and scenic views. However, a number of commercial and agricultural uses in the vicinity of the lake produce variation in water quality. You are interested in deriving a hedonic pricing estimate of willingness to pay to avoid an increase in the concentration of fecal coliform. The New York State Department of Environmental Conservation has provided you with data on sales of waterfront property from 1990 to 2010. Included in this data are sales prices, adjusted to 2010 dollars, and a few potential explanatory variables. These are summarized in columns 1 - 3 below: Variable Description Median Coefficient value Price Sales price (2010 $, thousands) 336 N/A VSTRU 126 1.4 Appraised house value (2010 $, thousands) Property acreage ACRES 0.90 116.9 ACRES 2 Acreage squared 2.42 -7.3 PLOD %of land not intensely developed 0.18 4.0 PWAT % of land with water or in humid areas 0.32 11.8 Minimum distance from polluting source 3.18 2.8 DWAL FCOL Concentration of fecal coliform (count/100mL) 109 -0.05 After testing many models, you decide the following model fits your data best: Price = Bo + B VSTRU + ACRES + B3 ACRES? + P4 PLOD + B5 PWATI + B6 *DWAL + B, FCOL + EEN(0,0)and E (EX) = 0 * (Note: you do not need to focus on the properties of &) You estimate Bo to equal 239 and estimate coefficients on the other explanatory variables as in column 4 of the table above. a) What is the marginal impact of one additional count/100mL of fecal coliform on house price? b) Provide an estimate of the willingness to pay to avoid an increase in the concentration of fecal coliform from 109 to 159 counts/100mL. Lake George in the Adirondack Mountains of upstate New York is a popular summer destination for residents of New York City. Lakeside homes allow users boating access, swimming and fishing access, and scenic views. However, a number of commercial and agricultural uses in the vicinity of the lake produce variation in water quality. You are interested in deriving a hedonic pricing estimate of willingness to pay to avoid an increase in the concentration of fecal coliform. The New York State Department of Environmental Conservation has provided you with data on sales of waterfront property from 1990 to 2010. Included in this data are sales prices, adjusted to 2010 dollars, and a few potential explanatory variables. These are summarized in columns 1 - 3 below: Variable Description Median Coefficient value Price Sales price (2010 $, thousands) 336 N/A VSTRU 126 1.4 Appraised house value (2010 $, thousands) Property acreage ACRES 0.90 116.9 ACRES 2 Acreage squared 2.42 -7.3 PLOD %of land not intensely developed 0.18 4.0 PWAT % of land with water or in humid areas 0.32 11.8 Minimum distance from polluting source 3.18 2.8 DWAL FCOL Concentration of fecal coliform (count/100mL) 109 -0.05 After testing many models, you decide the following model fits your data best: Price = Bo + B VSTRU + ACRES + B3 ACRES? + P4 PLOD + B5 PWATI + B6 *DWAL + B, FCOL + EEN(0,0)and E (EX) = 0 * (Note: you do not need to focus on the properties of &) You estimate Bo to equal 239 and estimate coefficients on the other explanatory variables as in column 4 of the table above. a) What is the marginal impact of one additional count/100mL of fecal coliform on house price? b) Provide an estimate of the willingness to pay to avoid an increase in the concentration of fecal coliform from 109 to 159 counts/100mL
