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The Indeterminacy of Equilibrium City Formation under Monopolistic Competition and Increasing Returns

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  • Marcus Berliant

    (Washington University in St. Louis)

  • Fan- chin Kung

    (Academia Sinica, City University of Hong Kong)

Abstract

We study the indeterminacy of equilibrium in the Fujita-Krugman (1995) model of city formation under monopolistic competition and increasing returns. Both the number and the locations of cities are endogenously determined. Assuming smooth transportation costs, we examine equilibria in city-economies where a finite number of cities form endogenously. For any positive integer K, the set of equilibria with K distinct cities has a smooth manifold of dimension K-1 as its interior for almost all parameter values in a regular parameterization. The disjoint union of these sets over all positive integers K constitutes the entire equilibrium set.

Suggested Citation

  • Marcus Berliant & Fan- chin Kung, 2004. "The Indeterminacy of Equilibrium City Formation under Monopolistic Competition and Increasing Returns," Urban/Regional 0407011, University Library of Munich, Germany, revised 31 Jul 2005.
    • Handle: RePEc:wpa:wuwpur:0407011
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    Cited by:

    1. Marcus Berliant & Yves Zenou, 2014. "Labor Differentiation and Agglomeration in General Equilibrium," International Regional Science Review, , vol. 37(1), pages 36-65, January.
    2. Berliant, Marcus, 2007. "Prospects for a unified urban general equilibrium theory," Regional Science and Urban Economics, Elsevier, vol. 37(4), pages 466-471, July.
    3. Fan-chin Kung, 2004. "Genericity analysis of split bifurcations," GE, Growth, Math methods 0410008, University Library of Munich, Germany, revised 24 Nov 2004.
    4. Berliant, Marcus & Kung, Fan-chin, 2009. "Bifurcations in regional migration dynamics," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 714-720, November.
    5. de Palma, André & Papageorgiou, Yorgos Y. & Thisse, Jacques-François & Ushchev, Philip, 2019. "About the origin of cities," Journal of Urban Economics, Elsevier, vol. 111(C), pages 1-13.
    6. Marcus Berliant & Ping Wang, 2005. "Dynamic Urban Models: Agglomeration and Growth," Contributions to Economic Analysis, in: Urban Dynamics and Growth: Advances in Urban Economics, pages 533-581, Emerald Group Publishing Limited.
    7. Ericson Richard E. & Kung Fan-chin, 2015. "Fundamental Non-convexity and Externalities: A Differentiable Approach," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 15(1), pages 49-62, January.
    8. Marcus Berliant, 2005. "Well Isn't That Spatial?! Handbook of Regional and Urban Economics: A View From Economic Theory," Urban/Regional 0503001, University Library of Munich, Germany, revised 08 Apr 2005.
    9. Dalmazzo, Alberto & de Blasio, Guido & Poy, Samuele, 2022. "Can Public Housing Trigger Industrialization?," Journal of Housing Economics, Elsevier, vol. 57(C).
    10. Kung, Fan-chin, 2008. "Voluntary contributions to multiple public goods in a production economy with widespread externalities," Journal of Mathematical Economics, Elsevier, vol. 44(12), pages 1364-1378, December.

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    More about this item

    Keywords

    city formation; smooth economies; increasing returns; indeterminacy of city systems;
    All these keywords.

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns

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