and Coulson (2004) are the first ones to apply the hedonic demand theory to estimate how rents and wages are influenced by an NFL franchise. Tu (2005) is the first one to separate out a stadium’s effect on property values using the hedonic demand theory. Subsequent papers studying the impact of stadia on property values have used the hedonic regression analysis to explain the effect of stadia on property values. ii. Supply of homes As popular in the hedonic housing model literature, we assume that supply for homes is inelastic in the short run. This fits in well with our analysis on the New Minnesota Stadium, which is being built on the same location as the last stadium and no surrounding properties have been sold or demolished. In other words there has been no significant increase or decrease in housing supply. Our analysis will therefore focus on the demand side of the housing market. iii. Splitting stadium utility Following Ahlfeldt and Kavetsos (2011) example we separate out the stadium utility into a functionality effect, effect of locating closer to stadium, and a visual amenity effect. Functional utility of a stadium can include pride and emotional attachment to the team, while visual amenity effect is due to the iconic structure of the stadium. Possible negative utility is derived from the increase in taxes to pay for the stadium, noise, traffic and overly passionate fans. Our hedonic price function now looks like: Since the New Minnesota Stadium is being built on the exact same location as the last one, we assume that the stadium functionality effect such as additional civic pride caused due to stadium announcement is zero . This is following Ahlfeldt and Kavetsos (2011) analysis of the New Wembley stadium, which was built on the exact same location as the old stadium. Additionally for the New Minnesota Stadium there has been no increase in taxes except for a one-time tax on tobacco inventory to pay for the state’s yearly bond payment. As a result we will ignore taxes in our analysis.
and Coulson (2004) are the first ones to apply the hedonic demand theory to estimate how rents and wages are influenced by an NFL franchise. Tu (2005) is the first one to separate out a stadium’s effect on property values using the hedonic demand theory. Subsequent papers studying the impact of stadia on property values have used the hedonic regression analysis to explain the effect of stadia on property values. ii. Supply of homes As popular in the hedonic housing model literature, we assume that supply for homes is inelastic in the short run. This fits in well with our analysis on the New Minnesota Stadium, which is being built on the same location as the last stadium and no surrounding properties have been sold or demolished. In other words there has been no significant increase or decrease in housing supply. Our analysis will therefore focus on the demand side of the housing market. iii. Splitting stadium utility Following Ahlfeldt and Kavetsos (2011) example we separate out the stadium utility into a functionality effect, effect of locating closer to stadium, and a visual amenity effect. Functional utility of a stadium can include pride and emotional attachment to the team, while visual amenity effect is due to the iconic structure of the stadium. Possible negative utility is derived from the increase in taxes to pay for the stadium, noise, traffic and overly passionate fans. Our hedonic price function now looks like: Since the New Minnesota Stadium is being built on the exact same location as the last one, we assume that the stadium functionality effect such as additional civic pride caused due to stadium announcement is zero . This is following Ahlfeldt and Kavetsos (2011) analysis of the New Wembley stadium, which was built on the exact same location as the old stadium. Additionally for the New Minnesota Stadium there has been no increase in taxes except for a one-time tax on tobacco inventory to pay for the state’s yearly bond payment. As a result we will ignore taxes in our analysis.