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Journal of Economics

, Volume 124, Issue 1, pp 75–92 | Cite as

Optimal size of a residential area within a municipality

  • Juan Carlos Bárcena-Ruiz
  • F. Javier Casado-Izaga
Article

Abstract

The purpose of this paper is to analyze the optimal size of a residential area within a municipality under different market structures. We find that under a private duopoly the optimal size of the residential area depends on the ratio between transportation costs and a negative externality due to congestion. The optimal size is the whole municipality when the ratio is low enough and a small area of the municipality when the ratio is high enough. The transition from a flat residential area to a more compact one is not continuous, so some large-enough residential areas are never optimal. Under a mixed duopoly the transition from a flat residential area to a more compact one is continuous as the ratio increases. By comparing the two cases we find that for intermediate values of this ratio a flat city is optimal for a private duopoly while compact cities emerge under a mixed duopoly.

Keywords

Spatial competition Location choice Residential area Congestion 

JEL Classification

D43 L13 R14 R52 

Notes

Acknowledgements

Financial support from Ministerio de Ciencia y Tecnología (ECO2015-66803-P) is gratefully acknowledged.

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Copyright information

© Springer-Verlag GmbH Austria 2017

Authors and Affiliations

  1. 1.Departamento de Fundamentos del Análisis Económico I, Facultad de Ciencias Económicas y EmpresarialesUniversidad del País VascoBilbaoSpain

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