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When worlds collide: Different comparative static predictions of continuous and discrete agent models with land

  • Berliant, Marcus
  • Sabarwal, Tarun

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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Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 38 (2008)
Issue (Month): 5 (September)
Pages: 438-444

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Handle: RePEc:eee:regeco:v:38:y:2008:i:5:p:438-444
Contact details of provider: Web page: http://www.elsevier.com/locate/regec

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  1. Marcus Berliant & Courtney LaFountain, 2004. "Space in General Equilibrium," Urban/Regional 0408002, EconWPA, revised 27 Jun 2005.
  2. Berliant, M. & Fujita, M., 1990. "Alonso'S Discrete Population Model Of Land Use: Efficient Allocations And Competitive Equilibria," RCER Working Papers 217, University of Rochester - Center for Economic Research (RCER).
  3. repec:cup:cbooks:9780521346627 is not listed on IDEAS
  4. Kamecke,Ulrich, 1987. "Mean-City a consistent approximation of bid rent equilibria," Discussion Paper Serie A 138, University of Bonn, Germany.
  5. 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.
  6. Robert E. Lucas & Esteban Rossi-Hansberg, 2002. "On the Internal Structure of Cities," Econometrica, Econometric Society, vol. 70(4), pages 1445-1476, July.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
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