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The Bid—Choice Land-Use Model: An Integrated Economic Framework

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  • F J Martínez

    (Department of Civil Engineering, University of Chile, PO Box 228/3, Santiago, Chile)

Abstract

Alonso's bid-rent theory and the discrete-choice random-utility theory appear in the literature as well-established alternative frameworks to model urban land use. As both approaches share the support of microeconomic theory, the main issue addressed in this paper is the theoretical comparison of the two approaches. It is demonstrated that in perfectly competitive land markets these approaches are equivalent, therefore they should be understood as complementary rather than alternative. The case of markets subject to speculative land prices is then explored for the cases of speculative supply and/or speculative demand, with the discovery that both approaches are theoretically equivalent in every case studied, thus extending the previous conclusion for the general case. These conclusions provide the base for an integrated and more comprehensive urban economic theory and for the bid-choice land-use model.

Suggested Citation

  • F J Martínez, 1992. "The Bid—Choice Land-Use Model: An Integrated Economic Framework," Environment and Planning A, , vol. 24(6), pages 871-885, June.
    • Handle: RePEc:sae:envira:v:24:y:1992:i:6:p:871-885
    DOI: 10.1068/a240871
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    References listed on IDEAS

    as
    1. Ellickson, Bryan, 1981. "An alternative test of the hedonic theory of housing markets," Journal of Urban Economics, Elsevier, vol. 9(1), pages 56-79, January.
    2. Gross, David J., 1988. "Estimating willingness to pay for housing characteristics: An application of the Ellickson bid-rent model," Journal of Urban Economics, Elsevier, vol. 24(1), pages 95-112, July.
    3. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
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