The median voter and the median consumer: Local private goods and population composition

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93 Scopus citations

Abstract

When a product's product provision entails fixed costs, it will be made available only if a sufficient number of people want it. Some products are produced and consumed locally, so that provision requires not only a large group favoring the product but a large number nearby. Just as local governments provide public goods appealing to individuals sharing the median voter's preferences for local public goods, product markets may provide an analogous benefit to individuals sharing living communities whose consumers tend to share his preferences in private goods. Using zip code level data on chain restaurants and restaurants overall, this paper documents how the mix of locally available restaurants responds to the local mix of consumers, with three findings. First, based on survey data on chain restaurant patronage, restaurant preferences differ substantially by race and education. Second, there is a strong relationship between restaurants and population at the zip code level, suggesting that restaurants' geographic markets are small. Finally, the mix of locally available chain restaurants is sensitive to the zip code demographic mix by race and by education. Hence, differentiated product markets provide a benefit-proximity to preferred restaurants-to persons in geographic markets whose customers tend to share their preferences.

Original languageEnglish (US)
Pages (from-to)567-582
Number of pages16
JournalJournal of Urban Economics
Volume63
Issue number2
DOIs
StatePublished - Mar 2008
Externally publishedYes

Bibliographical note

Funding Information:
I thank the Zell-Lurie Center at Wharton for financial support. Jon Moon and Andrew Ly provided excellent research assistance. Joe Gyourko, Jeff Milyo, and Albert Saiz, as well as the editor and two anonymous referees, provided very helpful input. All errors are my own.

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