Abstract
Using the theory of potential games, this paper addresses the emergence of polycentric structures in cities that result from trade-offs between agglomeration economies and congestion effects. We consider a model that explains the formation of multiple business centers in cities as an equilibrium outcome under the presence of households' commuting costs and positive technological externalities between firms. We show that the model is a large-population (non-atomic) potential game. To elucidate properties of stable spatial equilibria in the model, we consider local and global maximizations of the potential function, which are known to correspond to various equilibrium refinement criteria. We find that (i) the formation of business centers (agglomeration of firms) is possible only when households' commuting costs are sufficiently low and that (ii) the size (number) of business centers increases (decreases) monotonically as communication between firms becomes easier.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.