Product differentiation, monopolistic competition and city size

摘要: Abstract Traditionally, the formation of cities has been explained by such supply-side phenomena as scale economies in production or demand-side public goods. This paper presents an integrated demand and supply approach to spatial economy. Demand considerations, form consumer agglomeration (i.e., product variety), are presented a major cause urban agglomeration. On side, introduced. Both aspects examined using Dixit-Stiglitz model monopolistic competition characterize equilibrium optimum city size. We also discuss subsidy scheme that produces size corresponding first-best optimum. Then we analyze distribution population system two cities.