Hedonic demand for rented house in Kohima, Nagaland

Kelvin Lancaster considered a commodity as a bundle of characteristics or a bunch of vectors. The demand for a commodity is therefore a demand for its characteristics. Those characteristics may include time (whether a commodity is old or new), place (its location), positional value (whether it is owned or used by many or only a few), brand name (whether produced by this or that manufacturer), and so on. This view of considering a commodity as a bundle of characteristics opens an immensely wide scope for properly dealing with the demand for a commodity not only as a substitute of but also as a complement to other commodity or commodities. In this paper we have shown how the demand for a multi-characteristics commodity such as house can be estimated by a method suggested by Heinrich von Stackelberg that transforms the measures of various characteristics into polar coordinates, and how this method may be useful in identifying the complementary and substitutive characteristics of the commodity concerned. We have not gone in for identification of the demand equation. We apply this method on the primary data collected from 109 households inhabiting Kohima, the capital city of Nagaland (India). An analysis of the data suggests that consumers of rented house consider floor area, water supply and power supply complementary to each other and other characteristics of house as substitutes of the floor area. It has also been found that in Kohima a rented house is possibly an inferior commodity and its income elasticity for the overall sample is negative, although statistically insignificant.