Estimation of Hedonic Models Using a Multilevel Approach: An Application for the Swiss Rental Market

This paper is an empirical application of a hedonic model to determine rents in Switzerland. Unlike traditional hedonic models, we take account of the fact that data are clustered at different levels. The resulting spatial autocorrelation and heterogeneity permits a consideration of different submarkets within Switzerland. For the empirical analysis, we consider the special case of the clustering of apartments at municipality level. Our results show that even after controlling for housing and locational attributes, a significant part of rental differences are still attributable to municipality differences.