A Hedonic Approach
Appendix 6: Two-region general equilibrium model
We assume that the society is composed of two regions i(iϭ1, 2), homogeneous households have the utility function u(·) whose components are a composite good, land and environmental amenity, xi, l h, zi. A household i maximizes its utility [*]: max u(xi , l ih, zi ) h xi,li under the constraints of: wi ϩsϭxi ϩr ih lih (A6.1) where wi, rih, s are wage in region i, housing land rent in region i, and endowment, respectively: sϭ/N (A6.2) where is total proﬁts of ﬁrms and land owners; and N is the number of households as well as workers in the society. From the ﬁrst-order condition, ul ϭѨu/Ѩl, ux ϭѨu/Ѩx ux rih ϭul wi ϩsϭxi ϩril lih, we can get following demand functions: xi ϭxi(wi ϩs, rih, zi ) lih ϭlih(wi ϩs, rih, zi ). Thus the utility is: V(wi ϩs, rih, zi )ϭ u[xi(wi ϩs, rih, zi ),lih(wi ϩs, rih, zi ),zi]. (A6.6) (A6.4) (A6.5) (A6.3) There are two types of ﬁrm in the society. Each type of ﬁrm produces the same composite good by regional speciﬁc technology using the same 144 Appendix 6 145 resources of worker, ﬁrm’s land and amenity of environment, ni, l if, zi. They produce Xi. They maximize their proﬁt [*]: max ⌸ϭXi Ϫ(wi ni ϩri l if ) f ni,li (A6.7) under the production technological constraints: Xi ϭXi(ni,l if, zi ). Demand functions of worker and land are: ni ϭni(wi,...
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.