Public facility location and urban spatial structure: Equilibrium and welfare analysis

Abstract

We consider a model in which the location of a single public facility is fixed somewhere in an urban area. There are two firms that choose locations; the locations of households, competing for space in the land market, are also endogenous. The analysis examines the nature of the spatial equilibrium and shows that different kinds of equilibria can emerge depending on the parameters of the model. The welfare implications of changes in transportation cost and the location of the public facility are studied, and appear to be non-standard for some equilibrium configurations.