Regularities in the Formation and Evolution of Information Cities

In the real world, cities exist because of external economies associated with the geographic concentration of firms within a city. Of course, such a geographic proximity with input providers and consumers, would at first reduce transportation costs. But why cities, information cities, i.e. large agglomerations of people and economic activity emerge in the virtual world? In the Internet, transportation costs are zero. Web sites can easily be reached from anybody and everywhere with no particular cost. In these conditions of equal access distance, one would rather expect a smooth web geography with a relatively even distribution of visitors per site. However, the web economy illustrates strong agglomeration trends with a very small number of web sites capturing a large segment of the web population and the most of virtual economic activity. This paper attempts to provide a sound basis for the dynamics of population concentration in the web under increasing returns.