chapter  4
7 Pages

Fractional Assignment

II = 'IXl + Yl - ('2Xl + Yl - t). If II is positive, the consumer could afford the same consumption

bundle (Xl> Yl) at less expenditures. Therefore, in equilibrium, he would not remain at location 1. Similarly, the incentive 12 of the consumer living at k = 2 to move to k = 1 amounts to

incentive to move (II + 12)/2 is equal to t and, hence, positive. Therefore, for any pair '1 and '2 of land rents at the two locations, at least one consumer would have an incentive to move. An equilibrium configuration does not exist.