A vintage model of urban growth

This paper develops a vintage model of residential housing for an open city, where the utility level of residents is given by an exogenous function of time. Producers behave myopically in that they believe the future price per unit of housing services will equal the current price. Demolition occurs when the expected present value of profits from continuing to operate an existing structure equals the expected present value of profits from redevelopment. The model is analyzed under the assumption of Cobb-Douglas utility and production functions and constant rates of growth for income, commuting cost, the utility level, and the prices of non-land capital and agricultural land. Computer simulation provides a concrete example of a city which grows according to the model.