On the Emergence of Cities

Abstract

This paper considers the formation of cities in a simple model in which the preferences of agents depend on at most two characteristics of a location: its population and its average distance to the other agents. In such a simple model it is possible to recreate phenomena such as path dependency and centrally located cities which have been generated in more sophisticated models. Moreover, an example is provided in which cities emerge in the sense that the micro level preferences of agents do not appear to favor locating near or with other agents. When nonlinear effects are included then it is possible to show that even if efficient equilibria exist, they are not likely to occur and that there may exist extreme sensitivity to initial conditions. The model suggests that the mapping from individual preferences to population distributions merits further study.