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On Spatial Equilibria in a Social Interaction Model

  • Pascal Mossay
  • Pierre M. Picard

    ()

    (CREA, University of Luxembourg)

Social interactions are at the essence of societies and explain the gathering of in- dividuals in villages, agglomerations, or cities. We study the emergence of multiple agglomerations as resulting from the interplay between spatial interaction external- ities and competition in the land market. We show that the geographical nature of the residential space tremendously a¤ects the properties of spatial equilibria. In particular, when agents locate on an open land strip (line segment), a single city emerges in equilibrium. In contrast, when the spatial economy extends along a closed land strip (circumference), multiple equilibria with odd numbers of cities arise. Spatial equilibrium configurations involve a high degree of spatial symmetry in terms of city size and location, and can be Pareto-ranked.

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Paper provided by Center for Research in Economic Analysis, University of Luxembourg in its series CREA Discussion Paper Series with number 09-02.

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Date of creation: 2009
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Handle: RePEc:luc:wpaper:09-02
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  2. Marcus Berliant & Shin-Kun Peng & Ping Wang, 2000. "Production Externalities and Urban Configuration," Vanderbilt University Department of Economics Working Papers 0011, Vanderbilt University Department of Economics.
  3. Mossay, Pascal, 2003. "Increasing returns and heterogeneity in a spatial economy," Regional Science and Urban Economics, Elsevier, vol. 33(4), pages 419-444, July.
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  9. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
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  12. Pascal Mossay, 2003. "Increasing Returns And Heterogeneity In A Spatial Economy," Working Papers. Serie AD 2003-04, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  13. Maliar, Lilia & Maliar, Serguei & Valli, Fernando, 2010. "Solving the incomplete markets model with aggregate uncertainty using the Krusell-Smith algorithm," Journal of Economic Dynamics and Control, Elsevier, vol. 34(1), pages 42-49, January.
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  15. José J. Sempere Monerris & Rafael Moner Colonques & Amparo Urbano Salvador, 2010. "Trade liberalization in vertically related markets," Working Papers. Serie AD 2010-09, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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