A Note on the Equilibrium Properties of Locational Sorting Models
A central feature of many models of location choice – whether of firms or households, within or across cities – is the role of local interactions or spillovers, whereby the payoffs from choosing a location depend in part on the number or attributes of other individuals or firms that choose the same or nearby locations in equilibrium. The main goal of this paper is to develop the equilibrium properties of a broadly applicable and readily estimable class of sorting models that allow the location decision to depend on both fixed local attributes (including unobserved attributes) and such local interactions. In particular, we prove uniqueness in the case of congestion effects and use a series of simulations to demonstrate that a unique equilibrium is more likely to obtain (i) the smaller are any agglomeration effects, (ii) the larger are the set of choices available to the agents, (iii) the more "meaningful variation" there is in those choices, and (iv) the more heterogeneous are the agents themselves. This is encouraging for the use of our model to describe the sorting of individuals and firms over geographic space, where the number of choices is usually large and variation in exogenous fixed attributes can be important. Moreover, these results conveniently coincide with the conditions required for conometric identification of our model.
|Date of creation:||28 Jul 2004|
|Date of revision:|
|Contact details of provider:|| Web page: http://icf.som.yale.edu/|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marianne Bertrand & Erzo F.P. Luttmer & Sendhil Mullainathan, 1998.
"Network Effects and Welfare Cultures,"
NBER Working Papers
6832, National Bureau of Economic Research, Inc.
- Marianne Bertrand & Erzo F. P. Luttmer & Sendhil Mullainathan, 1999. "Network Effects and Welfare Cultures," Working Papers 9903, Harris School of Public Policy Studies, University of Chicago.
- Marianne Bertrand & Erzo Luttmer & Sendhil Mullainathan, 1998. "Network Effects and Welfare Cultures," Working Papers 784, Princeton University, Department of Economics, Industrial Relations Section..
- Bertrand, M. & Luttmer, E.F.P. & Mullainathan, S., 1998. "Network Effects and Welfare Cultures," Papers 201, Princeton, Woodrow Wilson School - Public and International Affairs.
- Sendhil Mullainathan & Marianne Bertrand & Erzo F.P. Luttmer, 1998. "Network Effects and Welfare Cultures," Working papers 98-21, Massachusetts Institute of Technology (MIT), Department of Economics.
- Marianne Bertrand & Erzo F.P. Luttmer & Sendhil Mullainathan, 1999. "Network Effects and Welfare Cultures," JCPR Working Papers 62, Northwestern University/University of Chicago Joint Center for Poverty Research.
- Holger Sieg & V. Kerry Smith & H. Spencer Banzhaf & Randy Walsh, .
"Estimating the General Equilibrium Benefits of Large Changes in Spatially Delineated Public Goods,"
GSIA Working Papers
2003-07, Carnegie Mellon University, Tepper School of Business.
- Holger Sieg & V. Kerry Smith & H. Spencer Banzhaf & Randy Walsh, 2004. "Estimating The General Equilibrium Benefits Of Large Changes In Spatially Delineated Public Goods," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(4), pages 1047-1077, November.
- Brock, William A & Durlauf, Steven N, 2001.
"Discrete Choice with Social Interactions,"
Review of Economic Studies,
Wiley Blackwell, vol. 68(2), pages 235-60, April.
- Edward E. Glaeser & Bruce Sacerdote & Jose A. Scheinkman, 1995.
"Crime and Social Interactions,"
Harvard Institute of Economic Research Working Papers
1738, Harvard - Institute of Economic Research.
- Schelling, Thomas C, 1969. "Models of Segregation," American Economic Review, American Economic Association, vol. 59(2), pages 488-93, May.
- Dennis Epple & Holger Sieg, 1999. "Estimating Equilibrium Models of Local Jurisdictions," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 645-681, August.
- Patrick Bayer & Christopher Timmins, 2007.
"Estimating Equilibrium Models Of Sorting Across Locations,"
Royal Economic Society, vol. 117(518), pages 353-374, 03.
- Patrick J. Bayer & Christopher D. Timmins, 2004. "Estimating Equilibrium Models of Sorting Across Locations," Yale School of Management Working Papers ysm415, Yale School of Management.
- Patrick Bayer & Christopher Timmins, 2003. "Estimating Equilibrium Models of Sorting across Locations," Working Papers 862, Economic Growth Center, Yale University.
- Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
- Patrick Bayer & Robert McMillan & Kim Rueben, 2005.
"Residential Segregation in General Equilibrium,"
NBER Working Papers
11095, National Bureau of Economic Research, Inc.
- Uwe Deichmann & Marianne Fay & Jun Koo & Somik V. Lall, 2004.
"Economic structure, productivity, and infrastructure quality in Southern Mexico,"
The Annals of Regional Science,
Springer, vol. 38(3), pages 361-385, 09.
- Deichmann, Uwe & Fay, Marianne & Jun Koo & Lall, Somik V., 2002. "Economic structure, productivity, and infrastructure quality in southern Mexico," Policy Research Working Paper Series 2900, The World Bank.
- Edward L. Glaeser & Jose Scheinkman, 2000.
NBER Working Papers
8053, National Bureau of Economic Research, Inc.
- Edward L. Glaeser & Jose A. Scheinkman, 2001. "Non-Market Interactions," Harvard Institute of Economic Research Working Papers 1914, Harvard - Institute of Economic Research.
- Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
- Vernon Henderson, 1999. "Marshall's Economies," NBER Working Papers 7358, National Bureau of Economic Research, Inc.
- Michael L. Katz & Carl Shapiro, 1994. "Systems Competition and Network Effects," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 93-115, Spring.
When requesting a correction, please mention this item's handle: RePEc:ysm:somwrk:ysm411. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.