The impact of transportation cost uncertainty on urban structure

Yorgos Y. Papageorgiou, David Pines

Research output: Contribution to journalArticlepeer-review

Abstract

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.

Original languageEnglish
Pages (from-to)247-260
Number of pages14
JournalRegional Science and Urban Economics
Volume18
Issue number2
DOIs
StatePublished - May 1985

Fingerprint

Dive into the research topics of 'The impact of transportation cost uncertainty on urban structure'. Together they form a unique fingerprint.

Cite this