When Worlds Collide: Different Comparative Static Predictions of Continuous and Discrete Agent Models with Land
Marcus Berliant () and
Tarun Sabarwal ()
MPRA Paper from University Library of Munich, Germany
This paper presents a difference in the comparative statics of general equilibrium models with land when there are finitely many agents, and when there is a continuum of agents. Restricting attention to quasi-linear and Cobb-Douglas utility, it is shown that with finitely many agents, an increase in the (marginal) commuting cost increases land rent per unit (that is, land rent averaged over the consumer's equilibrium parcel) paid by the consumer located at each fixed distance from the central business district. In contrast, with a continuum of agents, average land rent goes up for consumers at each fixed distance close to the central business district, is constant at some intermediate distance, and decreases for locations farther away. Therefore, there is a qualitative difference between the two types of models, and this difference is potentially testable.
Keywords: Large Urban Economies; Comparative Statics; Continuous and Discrete Agent Models (search for similar items in EconPapers)
JEL-codes: R13 D51 R14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo and nep-ure
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Journal Article: When worlds collide: Different comparative static predictions of continuous and discrete agent models with land (2008)
Working Paper: When worlds collide: Different comparative static predictions of continuous and discrete agent models with land (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:7312
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