On the Specification of Indirect Utility and Willingness to Pay for Discrete Residential Location Models

In this paper we develop a framework to describe the individual choice of residential location using the microeconomics of discrete choices. The individual is seen as deciding frequency, duration, and location of a set of activities for each potential residential zone, knowing the distribution of goods and activities in space as well as transport costs and travel times. The conditional indirect utility function and its associated willingness to pay function for each zone are obtained, where the roles of accessibility, income, and neighborhood attributes emerge clearly. Zonal utility in discrete location choice models can be specified and interpreted using these functions.