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When Worlds Collide: Different Comparative Static Predictions of Continuous and Discrete Agent Models with Land

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Berliant, Marcus
Sabarwal, Tarun

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Abstract

This paper presents a difference in the comparative statics of general equilibrium models with land when there are finitely many agents, and when there is a continuum of agents. Restricting attention to quasi-linear and Cobb-Douglas utility, it is shown that with finitely many agents, an increase in the (marginal) commuting cost increases land rent per unit (that is, land rent averaged over the consumer's equilibrium parcel) paid by the consumer located at each fixed distance from the central business district. In contrast, with a continuum of agents, average land rent goes up for consumers at each fixed distance close to the central business district, is constant at some intermediate distance, and decreases for locations farther away. Therefore, there is a qualitative difference between the two types of models, and this difference is potentially testable.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 7312.

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Date of creation: 22 Feb 2008
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Handle: RePEc:pra:mprapa:7312

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Keywords: Large Urban Economies Comparative Statics Continuous and Discrete Agent Models

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Find related papers by JEL classification:
R13 - Urban, Rural, and Regional Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
R14 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Land Use Patterns

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Berliant, Marcus & ten Raa, Thijs, 1991. "On the continuum approach of spatial and some local public goods or product differentiation models: Some problems," Journal of Economic Theory, Elsevier, vol. 55(1), pages 95-120, October. [Downloadable!] (restricted)
  2. Kamecke Ulrich, 1993. "Mean City--A Consistent Approximation of Bid Rent Equilibria," Journal of Urban Economics, Elsevier, vol. 33(1), pages 48-67, January. [Downloadable!] (restricted)
  3. Berliant, Marcus, 1991. "Comments on: 'On the foundations of land use theory: Discrete versus continuous populations' by Y. Asami, M. Fujita and T.E. Smith," Regional Science and Urban Economics, Elsevier, vol. 21(4), pages 639-645, December. [Downloadable!] (restricted)
  4. Robert E. Lucas & Esteban Rossi-Hansberg, 2002. "On the Internal Structure of Cities," Econometrica, Econometric Society, vol. 70(4), pages 1445-1476, July. [Downloadable!] (restricted)
  5. Asami, Y. & Fujita, M. & Smith, T. E., 1991. "On the foundations of land use theory : Discrete versus continuous populations," Regional Science and Urban Economics, Elsevier, vol. 20(4), pages 473-508, February. [Downloadable!] (restricted)
  6. Marcus Berliant & Courtney LaFountain, 2004. "Space in General Equilibrium," Urban/Regional 0408002, EconWPA, revised 27 Jun 2005. [Downloadable!]
  7. Berliant, Marcus & Fujita, Masahisa, 1992. "Alonso's Discrete Population Model of Land Use: Efficient Allocations and Competitive Equilibria," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(3), pages 535-66, August. [Downloadable!] (restricted)
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  8. Papageorgiou, Yorgos Y. & Pines, David, 1990. "The logical foundations of urban economics are consistent," Journal of Economic Theory, Elsevier, vol. 50(1), pages 37-53, February. [Downloadable!] (restricted)
  9. Berliant, Marcus, 1985. "Equilibrium models with land : A criticism and an alternative," Regional Science and Urban Economics, Elsevier, vol. 15(2), pages 325-340, June. [Downloadable!] (restricted)
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  1. Berliant, Marcus, 2006. "Prospects for a unified urban general equilibrium theory," MPRA Paper 379, University Library of Munich, Germany. [Downloadable!]
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