Publication Type
Working Paper
Version
publishedVersion
Publication Date
3-2013
Abstract
Central place theory is a key building block of economic geography and an empirically plausible description of city systems. This paper provides a rationale for central place theory via a dynamic programming formulation of the social planner's problem of city hierarchy. We show that there must be one and only one immediate smaller city between two neighboring larger-sized cities in any optimal solution. If the fixed cost of setting up a city is a power function, then the immediate smaller city will be located in the middle, confirming the locational pattern suggested by Christaller [4] . We also show that the solution can be approximated by iterating the mapping defined by the dynamic programming problem. The main characterization results apply to a general hierarchical problem with recursive divisions.
Keywords
Central place theory, City hierarchy, Dynamic programming, Fixed point, Principle of optimality, R12, R13
Discipline
Behavioral Economics | Economics | Economic Theory | Urban Studies and Planning
Research Areas
Applied Microeconomics
First Page
1
Last Page
37
Citation
HSU, Wen-Tai; HOLMES, Thomas J.; and MORGAN, Frank.
Optimal City Hierarchy: A Dynamic Programming Approach to Central Place Theory. (2013). 1-37.
Available at: https://ink.library.smu.edu.sg/soe_research/1533
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Included in
Behavioral Economics Commons, Economic Theory Commons, Urban Studies and Planning Commons
Comments
Published in Journal of Economic Theory, 2014, 154, 245-273. DOI: 10.1016/j.jet.2014.09.018. Full text at: https://ink.library.smu.edu.sg/soe_research/1642