Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/338363 
Year of Publication: 
2026
Series/Report no.: 
CESifo Working Paper No. 12399
Publisher: 
Munich Society for the Promotion of Economic Research - CESifo GmbH, Munich
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 references. 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 Fréchet 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: 
H2
R5
Document Type: 
Working Paper
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