A probabilistic model of location choice with neighborhood effects

This paper tries to develop a probabilistic model of location choice by many types of individuals who interact among themselves in the presence of neighborhood effects. Equilibrium is defined as an allocation of individuals among locations such that for every type of individuals the selection probability for each location is equal to the proportion of individuals actually choosing the location in question. The existence of equilibrium is proved under usual continuity assumptions. The equilibrium is shown to be unique and stable in the presence of neighborhood effects, if the degree of externality is sufficiently small.