Stability and sustainability of urban systems under commuting and transportation costs

This paper explores the conditions for the emergence of a system of cities in a general equilibrium setting that accounts for the cost of shipping commodities between cities and the commuting cost borne by consumers within cities. Potential cities are equally distributed over a circular space. We find that the multiplicity of stable spatial equilibria is the rule and not the exception. Using the concept of stability areas to study the transition from one stable equilibrium to the next, we show that decreasing commuting or transportation costs generate equilibrium paths that feature either a megalopolis or hierarchical system of cities.