The Value of Vertical Status: Evidence from the Real Estate Market
Abstract
Economists typically assume an individual utility as a function of own consumption.Yet, the pursuit of status, as defined as one’s own standing relative to others in
a relevant preference group, appears to be nearly as fundamental an aspect of human
behavior. With conspicuous consumption, it is insufficient to own or consume a product,
but rather that the consumption is visible to others. Drawing from linguistics and
psychology literature, in this paper, we examine vertical status as it manifests one’s
apartment height relative to the height of others in the same building. We explore the
value of status based on the price of apartment units in mid and high-rise condominium
structures, controlling among others, for actual height and view. Based on extensive
data from Vancouver (Canada), we find that there is a significant price premium for
being higher up compared to others in the building. Specifically, ceteris paribus, moving
from the bottom to the top floor of a building generates an average status premium
of about 8 percent of the average transaction price. Further, the marginal value of
status increases as one climbs to higher floors, especially in taller buildings. Results
are robust to a series of model and sample specifications.