DEVELOPMENT OF AN URBAN LAND-USE MODEL EMPLOYING NESTED CES FUNCTIONS

Abstract

  In urban land-use models, two types of behaviors, that are land-service consumption and residential location choice of household, must be considered simultaneously. CES-type models are used for the description of land-service consumption, which are introduced from consumption theory assuming CES utility function. On the other hand, logit-type models are used for the description of residential location choice, which are introduced from discrete choice theory. In this paper, an urban land-use model employing CES functions for the two descriptions is introduced in the reference of consumption models of Anderson et al. And it is shown that this urban land-use model is equal to the optimization conditions of utility maximization problem assuming 2-level nested CES utility function. In the latter of this paper, commuting cost is introduced to this model, and then different types of households and land-service markets are considered in this model. Moreover, it is shown that EV and CV are defined for the measurement of spatial welfare in this urban land-use model.