Change in Land use through Microsimulation of Market Dynamics

Abstract

Various land use models are now available, but a market-based model with sufficient spatial resolution and defensible behavioral foundations remains elusive. The model system developed in the study described here emphasized the interactions of individual market agents (on both the demand and the supply sides) and enjoyed behavioral foundations for each of the key actors at the level of parcels. Auction (or competition between market agents) was used to simulate price adjustment, and market-clearing prices were endogenously determined by iterative adjustment of the bidding prices for residential and commercial properties. A series of models for households, firms, and land developers and owners was estimated with actual data from Austin, Texas. The estimation results revealed tangible behavioral foundations for the evolution of urban land uses. The model forecasts demonstrated the strengths and limitations of this market simulation approach. Although equilibrium prices in forecast years were generally lower than those that were observed or expected, the spatial distributions of property values, new development, and individual agents were reasonable.