When worlds collide: Different comparative static predictions of continuous and discrete agent models with land☆

Available online 13 May 2008 This paperpresents a difference in the comparative statics of general equilibriummodelswith land when there are finitely many agents, and when there is a continuum of agents. Restricting attention to quasi-linear and Cobb–Douglas utility, it is shown that with finitely many agents, an increase in the (marginal) commuting cost increases land rent per unit (that is, land rent averaged over the consumer's equilibrium parcel) paid by the consumer located at each fixed distance from the central business district. In contrast, with a continuumof agents, average land rent goes up for consumers at each fixed distance close to the central business district, is constant at some intermediate distance, and decreases for locations farther away. Therefore, there is a qualitative difference between the two types of models, and this difference is potentially testable. © 2008 Elsevier B.V. All rights reserved. JEL classification: R13 D51 R14