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Spatial Competition with a Land Market: Hotelling and Von Thunen Unified

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  • Masahisa Fujita
  • Jacques-François Thisse

Abstract

We introduce into the standard spatial competition model the consumption of land by households, and study the spatial competition under the influence of a land market. In contrast to the standard assumption of a fixed, given distribution of households, we introduce the possibility of households' relocation in reaction to firms' location decisions. Thus, the spatial distribution of households is treated as endogenous, and a land market is introduced on which households compete for land-use. Households consume simultaneously land and firms' output. Accordingly, the demand of each household becomes in turn endogenous as it depends on the income left after the land rent is paid. Not surprisingly, the results obtained within this more general framework prove to be very different from the standard results. For example, in the 2- and 3-firm cases, the optimal configuration of firms is a Nash equilibrium when transport costs are high enough or the amount of vacant land is large enough. The existence property is restored in the 3-firm case when the transport costs are high enough. The introduction of vacant land causes a discontinuous change in the set of equilibrium configurations.

Suggested Citation

  • Masahisa Fujita & Jacques-François Thisse, 1986. "Spatial Competition with a Land Market: Hotelling and Von Thunen Unified," Review of Economic Studies, Oxford University Press, vol. 53(5), pages 819-841.
  • Handle: RePEc:oup:restud:v:53:y:1986:i:5:p:819-841.
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    Cited by:

    1. Jacques-François Thisse & Gilles Duranton, 1996. "La politique foncière dans une économie spatiale," Revue Économique, Programme National Persée, vol. 47(2), pages 227-261.
    2. Berliant, Marcus & Peng, Shin-Kun & Wang, Ping, 2002. "Production Externalities and Urban Configuration," Journal of Economic Theory, Elsevier, vol. 104(2), pages 275-303, June.
    3. Marcus Berliant & Yves Zenou, 2014. "Labor Differentiation and Agglomeration in General Equilibrium," International Regional Science Review, , vol. 37(1), pages 36-65, January.
    4. Florence Gofette-Nagot & Bertrand Schmitt, 1997. "Agglomeration economies and spatial configurations in rural areas," Working Papers hal-01526882, HAL.
    5. repec:udc:esteco:v:44:y:2017:i:1:p:33-51 is not listed on IDEAS
    6. Hemanta Shrestha & Dennis Heffley, 2003. "Regional Integration and Industrial Location in a Landlocked Spatial Economy," Working papers 2003-07, University of Connecticut, Department of Economics.
    7. Louafi Bouzouina & Bernard Quetelard & Florence Toilier, 2013. "Émissions de CO2 liées à la mobilité domicile-travail : une double lecture par le lieu de résidence et le lieu de travail des actifs à Lyon et à Lille," Post-Print halshs-01086008, HAL.
    8. Aguirre, Inaki & Paz Espinosa, Maria, 2004. "Product differentiation with consumer arbitrage," International Journal of Industrial Organization, Elsevier, vol. 22(2), pages 219-239, February.
    9. Martin Richardson, 2004. "A high-rise on Main Street: Hotelling with mobile consumers," ANU Working Papers in Economics and Econometrics 2004-444, Australian National University, College of Business and Economics, School of Economics.
    10. Thisse, Jacques-Francois & Wildasin, David E., 1995. "Optimal transportation policy with strategic locational choice," Regional Science and Urban Economics, Elsevier, vol. 25(4), pages 395-410, August.
    11. Lai, Fu-Chuan & Tsai, Jyh-Fa, 2004. "Duopoly locations and optimal zoning in a small open city," Journal of Urban Economics, Elsevier, vol. 55(3), pages 614-626, May.
    12. Antoni Calvó-Armengol & Yves Zenou, 2002. "The Importance of the Distribution of Consumers in Horizontal Product Differentiation," Journal of Regional Science, Wiley Blackwell, vol. 42(4), pages 793-803.
    13. Shino, Junnosuke & Kawasaki, Ryo, 2012. "Farsighted stable sets in Hotelling’s location games," Mathematical Social Sciences, Elsevier, vol. 63(1), pages 23-30.
    14. Catherine Baumont & Jean-Marie Huriot, 1996. "From von Thuenen to Fujita : continuity or rupture ?
      [De von Thünen à Fujita : continuité ou rupture ?]
      ," Working Papers hal-01527151, HAL.
    15. Akio Kishi & Tatsuhito Kono & Yoshitaka Nozoe, 2015. "Location of Retail Stores in City Center and Outskirts under Spatial Price Competition: Improvements in Radial and Ring Roads," The Review of Regional Studies, Southern Regional Science Association, vol. 45(2), pages 173-194, Fall.
    16. Yves Zenou, 1996. "Marché du travail et économie urbaine. Essai d'intégration," Revue Économique, Programme National Persée, vol. 47(2), pages 263-288.
    17. Jan K. Brueckner & Jacques-FranÁois Thisse & Yves Zenou, 2002. "Local Labor Markets, Job Matching, and Urban Location," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 155-171, February.
    18. Roland Andersson & Bo Söderberg, 2012. "Financing roads and railways with decentralized real estate taxes: the case of Sweden," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 48(3), pages 839-853, June.
    19. Camacho-Cuena, Eva & Garcia-Gallego, Aurora & Georgantzis, Nikolaos & Sabater-Grande, Gerardo, 2005. "Buyer-seller interaction in experimental spatial markets," Regional Science and Urban Economics, Elsevier, vol. 35(2), pages 89-108, March.
    20. Jyh-Fa Tsai & Shin-Kun Peng & Fu-Chuan Lai, 2006. "Spatial duopoly with zoning," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 40(3), pages 515-530, August.

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