Question

What is a Monocentric city? What determines land prices in a Monocentric city?

Answer 1

Both topography and an infinite supply of buildable land surround a monocentric city. Within the initial model, the fraction of buildable land at each radial distance is an exogenous power function of that radial distance If the exponent is negative, the distance reduces the fraction of buildable land at each radial distance. The unit cost of developing buildable vacant land within the city is constant and non-decreasing with radial distance beyond its external boundaries. With distance, the above costs increase if developers have to pay to extend the streets and services from the boundary to the land. Homes, like consumer durables, are sold in a spot market. Aggregate demand for housing is isoelastic

There are other consequences of endogenous growth on slopes. More notably, both the elasticity of the price gradient of housing and the rate of growth of the housing prices decreases proportionally. Cities then have steeper price gradients and faster appreciation of housing, with higher construction costs on slopes or fewer viewing premiums. Cities also have more sprawl and higher prices for housing with either attribute

Speedier appreciation of housing with smaller viewing premiums can help to explain a negative relationship between appreciation of housing and the power function coefficient for buildable land. Relatively more buildable land can be combined with a smaller supply of potential lots with unviewed views relative to lots and thus a larger premium for views. This induces more construction on slopes relative to the periphery, flattening the price gradient and, in turn, reducing the rate of housing appreciation. Thus, cities with larger power function coefficients may have a slower appreciation of the housing.