An Agent-Based Model of Exurban Land Development

In contrast to urban areas that are aptly characterized by a large population base and scarce land supply, exurban regions have limited households and plentiful land. This basic difference has far reaching implications for spatial equilibrium in exurban land markets. Rather than bidding their maximum willingness-to-pay and reaching a spatial equilibrium in which households are indifferent to location, as is the central condition of urban economic models, we argue that exurban households will be able to retain some amount of surplus in moving to an exurban location and therefore will choose the location that maximizes this locational surplus. In this paper, we first review the handful of structural spatial models of exurban land development that have been developed. We then develop a structural spatial model of exurban land development that captures these hypothesized features of exurban land markets using an auction model to represent household bidding and adapting the Capooza and Helsley (1990) model to represent landowners’ optimal timing of development. A key innovation of our approach is that, in the absence of full capitalization of land or location differences into land prices, households have preferences for some locations over others and thus it is possible to order household location choices in time and space. This greatly facilitates modeling of land use dynamics by enabling us to model location and land use decisions sequentially in time rather than assuming that all development is instantaneous for given levels of population and income in the region. In addition, the spatial agent-based simulation method that is used to implement the model permits an explicit examination of the implications of exurban land market conditions for the evolution of urban development pattern. Specifically, we ask whether these exurban market conditions explain the emergence and persistence of so-called leapfrog development that is characteristic of exurban regions.