SFB 303 Discussion Paper No. A - 138
Author: Kamecke, Ulrich
Title: Mean City - A Consistent Approximation of Bid Rent Equilibria
Abstract: The bid rent equilibrium is used to explain the residential location in a monocentric city for a continuum of
consumers. This paper shows how the equilibrium can be approximated consistently with finite large
economies.In the first part the model with finitely many consumers is described as an auction game. The set of
equilibrium payoffs is homeomorphic to a high dimensional cube.In the second part a replication procedure is
developed. The transportation costs shrink as the number of consumers grows and so the average endowment
with land of the same quality is held constant. The equilibria of the corresponding land auctions are shown to
converge to the unique bid rent equilibrium.
Creation-Date: November 1987
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