The impact of peripheral shopping centers on dense urban areas: application to Brussels

In this paper we develop a model of the urban economy, where the commercial sub center of a city, goes in competition with a peripheral sub center. We consider both centers to be in a spatial asymmetric duopoly, where both centers need to compete for customers and employees. Competition takes the form of a joint price and quality competition, where the transport network and the accessibility of the center take a vital role. We approach quality from a ‘varieties’ stand-point, where consumers make a trade-off between accessibility, price and variety. We study under which circumstances, peripheral shopping activity can be beneficial and under which circumstances harmful to the city. We consider the impact of the accessibility, both by private as by public transport. We also go deeper into the effect of a number of specific policy scenarios that are used to reduce the impact of peripheral shopping activity. The particular case we will focus on is the development of a large shopping center called U-Place, which will be constructed along the ring road of Brussels. The development of this center is controversial and the subject of intense debate between the local and national government. This paper starts with presenting a theoretical model of the urban region, using elements of general equilibrium modelling and New Economic Geography (NEG). The results is a flexible model for the location of shopping centers around (or in) urban areas. The model takes quality & variety, accessibility of the city and suburban region and the transport network as the main parameters. In a next step, the model is applied to the city of Brussels, where a number of new developments are planned around the ringroad (R0). We study the impact of these new developments by a simple applied spatial general equilibrium model, based on the theoretical model & actual data for Brussels. We comment on the new development and give insight in the short term and longer term impacts.- Theoretical model for development of shopping centers around urban areas using elements of New Economic Geography & variety based competition. - Critical analysis of the impact of new developments on the ring road of Brussels