TY - JOUR
T1 - The impact of transportation cost uncertainty on urban structure
AU - Papageorgiou, Yorgos Y.
AU - Pines, David
PY - 1985/5
Y1 - 1985/5
N2 - Under an uncertain transportation cost, residential choice is made before the actual state of the world reveals itself. Formally, this resembles the theory of saving under uncertainty. Exploring this resemblance, we investigate the effect on urban structure of introducing uncertainty in transportation cost. Our main conclusion is that risk does not necessarily have the same effect on the city that an increase in transportation cost does in the deterministic case. If the utility function obeys the 'principle of decreasing risk aversion to concentration', introducing risk causes the urban area to contract (as in the case of an increasing transportation cost), but the equilibrium utility level may either increase or decrease. If, on the other hand, utility does not satisfy the above principle, introducing risk causes the utility level to decline (as if the case of an increasing transportation cost), but the urban area may either expand or contract.
AB - Under an uncertain transportation cost, residential choice is made before the actual state of the world reveals itself. Formally, this resembles the theory of saving under uncertainty. Exploring this resemblance, we investigate the effect on urban structure of introducing uncertainty in transportation cost. Our main conclusion is that risk does not necessarily have the same effect on the city that an increase in transportation cost does in the deterministic case. If the utility function obeys the 'principle of decreasing risk aversion to concentration', introducing risk causes the urban area to contract (as in the case of an increasing transportation cost), but the equilibrium utility level may either increase or decrease. If, on the other hand, utility does not satisfy the above principle, introducing risk causes the utility level to decline (as if the case of an increasing transportation cost), but the urban area may either expand or contract.
UR - http://www.scopus.com/inward/record.url?scp=0024160497&partnerID=8YFLogxK
U2 - 10.1016/0166-0462(85)90015-8
DO - 10.1016/0166-0462(85)90015-8
M3 - ???researchoutput.researchoutputtypes.contributiontojournal.article???
AN - SCOPUS:0024160497
SN - 0166-0462
VL - 18
SP - 247
EP - 260
JO - Regional Science and Urban Economics
JF - Regional Science and Urban Economics
IS - 2
ER -