chapter  2
5 Pages

Introducing Location Choice

In this section, a model focussing on aspects of location choice is introduced which serves as the basic framework for the remaining part of this survey. After presenting the model, Section 2.1 recalls in detail classification of problems as outlined in the introduction. Section 2.2 contains a first welfare theorem for economies with location choice as well as a discussion of its notion of sustainability.

2.1. The model: classification of problems In the basic model, every location k = 1, 2, ... , K is endowed with a fixed amount Xk of a commodity which, in contrast to Section 1, is no longer assumed to be mobile and which we refer to as land. Since many papers to be reviewed deal with devoting resources to public investments, a supply z = ( ... , Zk' ..• ) of public goods has to be introduced where Zk denotes public investmems at location k. Total costs (public expenditures) amount to C = C(z) units of the composite good. The set of consumers is divided into classes of different types. Consumer types are denoted by i = 1, 2, ... , I whereas N? is the number of consumers of type i at the national level (total economy). An assignment n = ( ... ,nib' .. ) of consumers to locations describes the number nik of consumers of type i living at location k. For the "total economy" approach (see introduction), an assignment must satisfy the population constraint