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Preemptive Competition in City Development

Steven Heubeck

Journal of Public Economic Theory, 2007, vol. 9, issue 4, 641-651

Abstract: The rise of decentralization and polycentrism in cities raises questions of optimality. This paper proposes a model of two competing developers that generates new development prior to the optimal time. If demand is growing for new developments, the development built later will have potentially lower present value profitability, due to discounting, when compared to the earlier development. Both developers compete to gain the “first‐mover advantage” to build the first of the two developments, and developing sooner than what is optimal achieves this goal. This preemptive theory of competition offers a result that cities are more decentralized and polycentric than what is optimal.

Date: 2007
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Handle: RePEc:bla:jpbect:v:9:y:2007:i:4:p:641-651