An application of the hedonic price model with uncertain attribute ‐ The case of the People’s Republic of China

The implicit prices of housing characteristics concerning the physical structure, location, environment and the risk of construction quality in China are examined in this paper. The hedonic price model with uncertainty of construction quality is adopted. Data is collected from the Beijing residential market. The results indicate that consumers have different preferences for choosing residences in the different parts of Beijing and the marginal price of public facilities is negative. The most important preference suggests households in Beijing are willing to pay additional expenditures to protect themselves from low construction quality. An obvious political implication of this study is that further residential reform should be accompanied by improved construction quality under legal supervision and by encouraging real estate developers to allocate units according to the preferences of households.