Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/336611 
Year of Publication: 
2026
Series/Report no.: 
Discussion Paper No. 561
Publisher: 
Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition, München und Berlin
Abstract: 
We illustrate the coordination problem in the provision of distinctive architectural design that arises from design externalities within a quantitative model. To quantify the model, we conduct a quantitative review of a growing literature concerned with the costs and benefits of distinctive design as well as a survey of architectural design preferences. We find that distinctive buildings sell at a 15% premium, on average. Positive design spillovers from distinctive nearby buildings result in a 9% premium. Distinctive buildings, however, are about 25% more expensive to build. The distribution of design ratings within buildings is well described by a Fr'echet distribution with a shape parameter of about 4. Parametrising the model to match these moments, we show in counterfactual simulations that the optimal subsidy of distinctive buildings amounts to 10% of construction costs.
Subjects: 
Architecture
design
economics
regulation
welfare
JEL: 
R3
N9
Document Type: 
Working Paper

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