| Summary: | The market becomes inefficient when externalities cause market failure. However, an externality does not entrain inefficiency if a market other than the one that generates it accounts for it in some way. Airports are a well-known source of the negative externality noise; and housing market are commonly thought to be affected by airport noise. A hedonic model was applied to airport noise and the housing market, together. It was found that the housing market of the West Island of Montreal did account implicitly for the noise annoyance from Dorval Airport, hence that the noise was a pecuniary externality. Moreover, each additional unit of noise annoyance (NEFdB) was found to cause an average depreciation in housing price (NDSI) of 0.76%. Finally, the linguistic predominance (French- or English-speaking) of a neighhourhood's residents may be an appropriate Canadian analogue for the racial variables that have been specified in some hedonic property models in the U.S.
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