Finding the Sweet Spot in the City: a Monopolistic Competition Approach

Elizaveta Bespalova, Alim Moskalenko, Alexander Safin, Constantine Sorokin () and Andrey Yagolkovsky

MPRA Paper from University Library of Munich, Germany

Abstract: We propose a general equilibrium model to study the spatial inequality of consumers and firms within a city. Our mechanics rely on Dixit and Stiglitz monopolistic competition framework. The firms and consumers are continuously distributed across a two-dimensional space, there are iceberg-type costs both for goods shipping and workers com- muting (hence firms have variable marginal costs based on their location). Our main interest is in the equilibrium spatial distribution of wealth. We construct a model that is both tractable and general enough to stand the test of real city empirics. We provide some theoretical statements, but mostly the results of numerical simulations with the real Moscow data.

Keywords: spatial distribution; linear city; circular city; monopolistic competition (search for similar items in EconPapers)
JEL-codes: L12 O18 (search for similar items in EconPapers)
Date: 2016-07-18
New Economics Papers: this item is included in nep-ure
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Published in CEUR Workshop Proceeding Experimental Economics and Machine Learning.1627(2016): pp. 73-81

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